The UK banking industry is on the verge of a shake-up.
New legislation from the European Union looks set to pave the way for fintech companies to compete with the small club of banks that have dominated the UK market for decades.
“PSD2 will revolutionise banking like nothing we have seen before,” said Mark Hipperson, CTO at Centtrip.
PSD2, the Second Payment Services Directive, will create a level playing field for new payment service providers, including fintech companies like Centtrip. The directive is designed to increase competition across the EU and provide a high level of security for payments and account information.
It should also expose whether consumers are getting a raw deal from the existing banks, and how fintech is playing an ever-bigger role in how we manage our finances.
“The customers are winners at last,” said Mark.
Big four no more
This is not the first attempt to break up the oligopoly of Britain’s big four banks – in recent years a host of smaller new-breed lenders that assumed the moniker ‘challenger banks’, have sought to wrest influence from the stalwarts with mixed success.
“The challenger banks have potential to make things better for us all, but their problem is we are not switching (paying in our salaries or leaving our old bank) in the numbers they predicted,” said Mark.
PSD2, with its emphasis on fostering competition, could provide another challenge to the banks’ incumbent market position.
Payment technology has come a long way in the 11 years since the EU’s first Payment Services Directive and fintech firms have pioneered many of these advances. It seems right then that these innovative technology providers benefit from the second iteration of the EU rules.