Smartphone apps: the future of banking

Much excitement greeted the recent Competition and Markets Authority report on encouraging banks to harness the benefits of new technology for the benefit of their customers.

The CMA carried out an in-depth retail banking market investigation and its susbsequent report concluded that older, larger banks have little incentive to compete hard for customers’ business, while smaller and newer banks find it difficult to grow.

As a result, it’s the poor old customers who find themselves at the rough end, with many of us paying more than we should and not benefiting from new services.

The CMA’s investigations found many small businesses simply weren’t equipped to obtain comprehensive information about bank charges, service quality and the availability of credit.

The CMA wants to see banks accelerating the pace of technological change, giving them a deadline of early 2018 for introducing Open Banking – the step that would allow customers and small businesses to share their data securely with other banks and third parties through a single phone app.

It is also focusing firmly on stimulating competition, and making it far easier for customers to switch banks if they are not happy.

Alasdair Smith, who chaired the retail banking investigation, is upbeat about what lies in store for the industry. He said: “The reforms we have announced will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks.

“We are breaking down the barriers which have made it too easy for established banks to hold on to their customers. Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.”

Mr Smith adds that he wants customers: “…to be able to access new and innovative apps which will tailor services, information and advice to their individual needs.”

For me, that’s one of the most important and exciting developments – CMA’s recognition of the role smartphone apps can play in all this.

They will, for example, allow customers to compare markets easily, accessing customer account information the CMA says banks will have to make available to developers via Application Program Interfaces (APIs), essentially the nuts and bolts that allow secure software and apps to be built.

The pace of technological development is fast, and consumer confidence always tends to lag a little behind it. But it’s good to see the regulators going in to bat for customers and compelling the banks to make the most of the full range of 21st century advances, rather than dragging their feet.

The CMA’s view is completely in line with the approach we have adopted with SOSafe, our range of smartphone-based services that bring convenience, security and peace of mind to customers in payment card and identity protection, and mobile phone insurance.

We aim to be at the forefront of this fintech revolution and welcome the moves towards a more open banking environment – it is the obvious and only way forward.