News & Views - Savantor

Consumer banking reforms and mobile banking

Tuesday, 16 August 2016

The Competition and Markets Authority (CMA) has just published its report on its two year investigation into the retail banking market. The report concludes that the larger traditional banks do not have to compete hard enough for customer business and that the newer entrants into the banking market find it difficult to become established and grow their client base. The result of this is that many consumers end up paying more than they should do and do not benefit from new services.

Whilst this may not be a surprise to many people, the result of the investigation is that the CMA will be implementing a package of reforms, central to which are measures to ensure that customers benefit from technological advances and that new entrants and smaller providers are able to compete more fairly.

Key to the reforms is the requirement for Banks to implement Open Banking by early 2018, thereby enabling customers to manage their accounts with multiple providers through a single digital app making it easier to control their own financial data and to compare products on the basis of their own requirements.

The move is likely to enable customers to undertake all their banking via their mobile phone, thereby reducing the need to visit bank branches. Industry commentators have referred to it leading to people 'effectively having a bank branch in their pockets through their mobile phone'.

Whilst there will no doubt be a number of security concerns, the proposed reforms must be good news for UK challenger banks and tech companies challenging services offered by traditional financial institutions – and therefore good news for the majority of consumers too.

Recent research undertaken by the BBA shows that in 2015, banking app logins showed a rise of 50% over the previous year. Hence the new measures being introduced by the CMA will only serve to encourage the trend to use mobile phones for banking.

There will inevitably be an impact upon bank branches – already under threat of closure as customers become more tech-savvy. In consumer terms, however, we need to ensure that those who are less comfortable with mobile banking – typically those from the older generation - are either provided with the means to use it or given viable alternatives.

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