The Regulatory Landscape and You
Never before have we seen such a period of transformation in our industry. The norm no longer exists, you cannot even attempt to group it, put it in a box or tame it. It is a time of constant change and evolution…for the better. The top key players are now looking to new entrants into the industry asking the question ‘where to from here?’. The best advice, strap in and hang on, there are only more twists and turns to come.
There is no survival guide, the only advice and I promise it is not BE CALM, is flexibility and agility. This is a time where collaboration is critical. No one, body or business holds all the cards or the key to enlightenment.
So like the many years that preceded this one, flying fast before our eyes, let’s take a moment to take stock and review where we are at…before it changes.
Where are we at?
Since 2013, over thirty regulatory and industry initiatives have been introduced, the primary objectives of these being the focus of risk reduction, standardisation, competition and transparency; and innovation.
What is the point?
Who do these new regulations serve? In short, everyone. Who would have ever thought business and consumers could be overjoyed with the banking industry?
Unless you are Evel Knievel, everyone else likes the thought of risk reduction.
From as early as the 2008 Global Financial Crisis to the recent cybersecurity breaches posed to some of the world’s largest retailers, reduction in fraud and security infringements have been paramount. Just on ten years ago when the world felt the effects of GFC, the relationship between banks and regulators have reached a place of calm and stability as financial institutions have placed vital importance on integrating security policies into their day-to-day practices and procedures.
Examples of risk reduction include: AML Regulation, EMV adoption in USA and Mobile Payments and Security in Europe.
Usually, the word ‘standard’ could be construed as boring. However, in this instance, it has set the platform for change.
With the lines blurring between borders, entities and enterprise, regulators have had to consider and prioritise how international cooperation can be achieved while upholding both the conventional and unconventional standards and legal principles. In essence, teamwork but on a global scale.
Global standardisation across the banking industry in its current form continues to provide ease and convenience for customers to pay and business to be conducted more efficiently.
We’ve seen the likes of SEPA turn a fragmented cross-border payments system into a single cashless platform. The Interchange Fee Regulation exposed legacy systems such as costly interchange fees, increasing transparency on charges, incorporating new benchmarks and caps, also improving competition by removing restrictions to merchants to pass on acceptance costs to cardholders.
So do we think standard is boring? It is anything but!
Examples of standardisation include: Virtual Account Management Systems – SEPA, Interchange Fee regulation, Electronic Bank Account Management.
Competition and Transparency
Back in the day, competitive reach for banks was determined by the number of their physical branches; this is in stark contrast to the world we live in today where technology and banking licenses define your virtual footprint.
Open API banking platforms are set to transform the landscape for new entrants to enter the market, creating increased competition and sparking innovation.
In a nutshell, it ‘encourages’ banks to share data securely via application programming interfaces (APIs) meaning consumers can start to benefit from a more transposable banking system.
Alasdair Smith, chairman of the UK’s retail banking investigation, commented: “For the first time innovative and secure apps will provide personalised services and information to cover all financial needs in one place, and make it easy for people to find out what bank account is best for them.”
It has been suggested that institutions that can overcome the high legacy cost bases from conventional banking will be able to harness this new, highly valuable mode of holistic banking, providing targeted offers, advice and solutions and as a result high returns and the ability to remain competitive in this new landscape.
Examples of competition and transparency include: open API banking platforms.
One of the most encouraging aspects of all the recent changes we’ve seen is that the most significant benefactor, rightfully so, is the customer. No longer is it just about providing great service, but the need to deliver a seamless, integrated customer focused experience across all mediums and channels.
Banks it seems since the dawn of time have had the competitive advantage and edge when it comes to customer data. Now, the Payments Service Directive 2 (PSD2), sees a new wave in banking where institutions are required, at the consent of the customer, to provide data access to fintechs and non-traditional banks – creating a level playing field.
Customers can not only expect an enhanced, more intuitive banking experience but additional benefits such as reduction in costs, less jargon, transparency of fees and a more simplified model with products that are easy to set up and access.
Sounds both refreshing and appealing, doesn’t it.
Anne Boden, co-founder and chief executive of U.K. Starling Bank, told CNBC, “in a world of open banking, the customer can choose a provider in each part of the value chain. And each bank has to participate in the value chain as an earners’ right to be there.”
Traditional banks are said to no longer be looking at new entrants to the market as a threat, but as a growing opportunity to value-add to customers.
Examples of Innovation include: PSD2, Digital Currency, Australia Payments Plan and Mobile Wallet.
Whether it be an evolution or revolution, as we start to settle into this new model of banking, only time will tell how it will take shape and what the future holds.
However, for now, as a banking customer, it feels like this is the era of me.
If you have any questions about banking regulations and how it affects your business, speak to one of our specialist team today. You can call us on +1833 245 5776 or send us an email via our website www.billpro.com/contact
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