What a regulatory overhaul of UK banking would look like
Leveling-up or parliamentary fluff? Though big on buzzwords the MPs’ report does also provide some practical advice for relatively cheap changes that could improve the banking sector. Many of these changes are centered around deregulation that would make it easier for neobanks and fintechs to scale. In theory, this will improve competition and offer badly needed benefits to consumers currently facing a cost of living crisis.
The report’s plan to develop open banking in the country is light on detail but timely: Open banking users are projected to grow 72% this year to hit 10.7 million, per Insider Intelligence forecasts.
However despite their practicality, the committee’s recommendations may face resistance:
- Altered regulations might provide neobanks and fintechs with a favorable climate for growth, but such regulations would likely be very unpopular with high street banks, which could view them as overly biased and harsh.
- The feasibility of having different rules for different regions is questionable and would prove unpopular with lenders in the capital.
- While branch closures are a hot topic, giving challenger banks the option to buy those set to close wouldn’t necessarily appeal to them. Many neobanks follow a digital-only business model and choose to do without a physical presence.
What’s next? The latest report offers some valuable insight into parliament’s wish to promote neobanks, fintechs, and open banking, but the next British prime minister is under no obligation to follow any of its advice. Both of the remaining candidates vying for the office have promised bold policy decisions: Liz Truss has made remarks she may reconsider the Bank of England’s independent decision-making on interest rates. But it’s still unclear whether either candidate would radically change financial services regulations.