The new year heralds a new era in the financial services industry with the introduction of Open Banking.
While some concerns have been aired around this innovation and how it will work in terms of the new General Data Protection Regulation and cyber security, we believe that the focus on customer choice in banking that this ushers in will increase as the year progresses, a move we welcome.
Following its retail banking investigation, the Competition and Markets Authority (CMA) concluded that older and larger banks do not have to compete hard enough for customers’ business.
Nine of the bigger banks adopted new Open Banking rules on 13th January, enabling customers to give consent to allow businesses – other than their bank – to access their current account information.
In addition, after a year of discussion and debate, international regulators have finally announced the finalised Basel III banking reforms, which intend to boost banking competition by levelling the playing field in terms of the capital requirements banks must hold, which will hopefully make it easier for smaller banks to compete in certain areas of lending when they come into effect from 2022.
These reforms will help increase innovation and competition in the banking sector. While the results of these changes will emerge over time, we are already factoring in the implications of these changes into our plans for products and services at Hampshire Trust Bank.
We believe it is vital for people to have easy access to a wider range of financial services, tailored more closely to their circumstances and requirements. At Hampshire Trust Bank, we pride ourselves on employing experts in the SME sectors in which we operate.
The CMA identified that “there is a particular problem in SME banking where many SMEs open their business current accounts at the same bank where they have their personal current accounts, then stick with that bank for their business loans”.
Our recent SME Growth Watch research found that SMEs in the top 10 cities in the UK are forecast to contribute £241bn to the economy by 2025, a 19% increase from the £202bn contributed in 2016. In order for SMEs to achieve their growth potential, they need more support, including greater financial support from a wider range of providers.
We believe that increasing customer choice in banking is key to helping UK SMEs to grow, in turn helping to drive the economy forward, which is good news all round.
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