For past few decades, the exceedingly competitive industry of finance has made it difficult for small challenger banks to withstand and customers to receive ideal and economical financial support. However, the entire industry is expected to encounter major changes with the Competition and Markets Authority (CMA)’s plan to implement Open Banking by 2018.
The CMA, a non-ministerial government department based in the UK in charge of monitoring competition and anti-competitive activities, has announced their official plans to implement a protocol known as Open Banking, which will require both large and medium-sized banks to publish objective information on quality of their services on a unified platform for all users.
Collective data gathered by the unified application will then be used by bank users to compare the services of their banks with others, enabling customers to fully understand the advantages and limitations of the services they’re using.
The CMA believes that such protocol will trigger the growth of innovative fintech platforms and startups which have significant advantage over traditional banks’ outdated IT and financial systems, as customers will be able to identify the technological and financial benefits of every service and product.
The integration of Open Banking as a core part of the systems of banks and financial institutions will further allow users to migrate from one platform to another, decreasing friction and cost involved previously.
“The reforms we have announced today will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks,” explained Chair of the banking investigation, Alisdair Smith.
“Our central reform is the Open Banking programme to harness the technological changes which we have seen transform other markets,” stated Smith. “We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs,” he added.
The program, if successfully integrated by the CMA by 2018, will provide more opportunities for emerging fintech firms and innovative financial technologies by banks, as it enables users to transparently compare each financial and technological service and product of banks.