Leveling or parliamentary farce? Although rich in buzzwords, the MPs’ report also provides practical advice for relatively cheap changes that could improve the banking sector. Many of these changes center on deregulation that would make it easier for neobanks and fintechs to scale. In theory, this will improve competition and provide much-needed benefits to consumers currently facing a cost of living crisis.
The report’s plan to develop open banking in the country is sketchy but timely: Open banking users expected to grow 72% this year to 10.7 millionby Insider Intelligence forecasts.
However, despite their practical nature, the committee’s recommendations may encounter resistance:
- Modified regulations could provide neobanks and fintechs with a favorable climate for growth, but such regulations would likely be very unpopular with big banks, who may view them as too biased and harsh.
- The feasibility of having different rules for different regions is questionable and would prove unpopular with lenders in the capital.
- Although branch closures are a hot topic, giving challenger banks the ability to buy those that are about to close would not necessarily be of interest to them. Many neobanks follow a digital-only business model and choose to forgo a physical presence.
And after? The latest report offers valuable insight into Parliament’s drive to promote neobanks, fintechs and open banking, but Britain’s next prime minister is under no obligation to follow its advice. The two remaining candidates vying for the post have promised bold policy moves: Liz Truss has makes remarks it may reconsider the Bank of England’s independent decision-making on interest rates. But it remains unclear whether either candidate would radically change financial services regulation.