Regulatory red tape is stopping fintech firms from boosting financial inclusion and helping consumers through a cost of living crunch, the industry body and EY said today.
In a new report, Innovate Finance and big four firm EY said today that City regulators need to quickly expand the UK’s open banking regime and loosen rules on “robo-advice” so that hard-up consumers can access free financial guidance on managing their debts.
Open banking was rolled out in the UK in 2017 to free up data sharing between big banks and small fintech firms but progress has slowed in the past 12 months as it enters a new phase of implementation.
The chief of Innovate Finance Janine Hirt said it was essential that regulators now ramp up the pace of movement in order to help consumers.
“There is more fintech companies can be doing to help people – especially with open banking, but this can only be made possible by regulatory change,” she told City A.M. “We are at a critical juncture, with consumers facing increasing pressures on their personal finances, and it’s essential there is a swift change in regulatory policy.”
The first stage of open banking was deemed materially complete by the Competition and Markets Authority earlier this year but progress is now hanging on a series of recommendations from the Joint Regulatory Oversight Committee (JROC), chaired by the Treasury, the CMA, Payments Systems Regulator and the Financial Conduct Authority.
The co-chairs of the JROC, Sheldon Mills of the FCA, and Chris Hemsley of the Payment Systems Regulator have said previously that the UK has “led the way on open banking” and they were “working with the industry and broader stakeholders as we work at pace to deliver our shared vision.”
The new report from the EY and Innovate Finance added that debt advice, offered by fintech firms, could help cash-strapped Brits’ more savvily handle their debts during the cost of living crunch.
EY’s UK head of fintech and the former interim chief of the FCA, Chris Woolard, said there was an opportunity for regulators and industry to work closer together and ensure access to fintech was being widened.
“FinTechs are already starting to come up with innovative solutions, using technology and data, to help ease these pressures and help households manage their finances better,” he said. “However, awareness of solutions can be low and some lack scale. If government, regulators and industry work closer together, there is the opportunity to create the right market environment for good ideas to succeed.”
The warnings come after the chair of the Financial Inclusion Commission warned in October last year that the fintech sector was not yet pulling its weight to reach consumers.
“At the Financial Inclusion Commission, we have gone through the prominent fintech companies, and very few of them suggest that inclusion is one of their objectives – either their business objectives or their social objective,” he told City A.M.
An FCA spokesperson said: “Open banking has a continuing role in promoting greater competition and innovation for the benefit of consumers, businesses and the wider economy. It will help maintain the UK’s international competitiveness and leadership in the field as well as helping to improve financial inclusion.
“We will continue to work with industry and others as we seek to fully realise the benefits open banking can bring.”