How fintech has forced UK banks to evolve beyond being a ‘utility’

The established banks are having to move beyond being utility providers by regulations like open banking and the continued challenge from innovative fintech providers.

Speaking during a panel session at Innovate Finance Global Summit in London today titled ‘What Does Fintech Need to Deliver Real Change?’ Imran Gulamhuseinwala, the open banking implementation trustee for the Competitions and Markets Authority (CMA) said: “Financial services has been a utility-based sector with a small number of players providing a largely homogeneous set of products.

“What the fintechs have really demonstrated is you can come into the market, you can provide a proposition because the barriers to entry are so low now. You can challenge some of these established players.

“So the question in my mind is: has fintech demonstrated that this entire industry is transitioning away from a utility to something that is more akin to other sectors in the economy? Be that retail or technology.”

Gulamhuseinwala sees this spurring a new wave of market entrants. “If you really roll that forward an industry sector becoming more open is not just about smaller companies coming in but I really do anticipate non-financial services incumbents coming into this space,” he said. “Whether they are mobile phone operators, pure tech companies or insurance companies. All of those lines are going to begin to blur.”

This ultimately stands to benefit consumers. As Gulamhuseinwala said: “All of the customers get a better deal as fintechs and their laser focus has been adopted by the incumbents.”

Also sat on the panel was Kevin Hanley, director of innovation at RBS, who had similar thoughts regarding the shift towards more customer-centric banking services. He said: “My thesis for the next ten years is that as an industry we need to spend a lot more time on what services we provide and be much more innovative. I think the whole industry is ripe for a new era of customer-centric design.”

This was echoed by the fintechs themselves on the panel. Jaidev Janardana, CEO at peer-to-peer lender Zopa said: “I think the single most important change is bringing back customer-centricity to financial services.”

He identified three elements to this: value and access to services, better customer experiences, and developing trust.

Kirsty Rutter, MD CIO at Barclays UK added: “We have moved past the threat and fear stage and the challenge that the fintech community has given us has energised our business and forced us to reconsider our operating model and get smarter at what we do.”

Rutter said innovation from fintech providers doesn’t worry her as much as the work being done by its fellow incumbent banks: “I generally like surprises as that keeps us on our toes. What I get most upset about is when an incumbent beats us to something we thought we were brilliant at, as that shows we might be slow to market.”

RBS’ Hanley said that while he’s not threatened by major industry developments such as Amazon’s recent partnering with JP Morgan, he does see these moves acting as “a catalyst internally to see how you respond”.