Banking on an open future - How new regulation will change the way you bank

‘Enjoyable’ is not a word most people would traditionally use to describe the relationship with their bank. It’s been a one-sided relationship for far too long. But disruptive technology is changing the banking landscape. FinTech (Financial Technology) is bridging the gap between conventional banking and a smooth user-experience. Think Monzo, Square, TransferWise, WeChat or Facebook Messenger. Payment app, Venmo handled $19 billion USD in transactions in the fourth quarter of 2018 alone. The moral of the story? The financial platforms of the future aren’t archaic banks, they’re technology driven.

In this article, we’ll explore how FinTech companies are using regulation and technology to challenge the traditional banking status quo.

Open Banking

Traditional banks have always held their customers’ personal information under lock-and-key to maintain a competitive advantage. But new regulation is unlocking the end-to-end value chain. Open Banking, a new initiative that came into force in 2016, is a secure way to use financial products and services from regulated apps and websites. It allows smaller banks and third-party companies to access customer information.

Within Open Banking, new payment regulations like the PSD2 (Revised Payment Service Directive) are shifting the payments and banking landscape. PSD2 allows banks to give non-bank rivals access to customer payment accounts. It paves the way for new applications that help people manage their finances, all without transactional information needing to go through a bank. Technology start-ups like Monzo, Chime or Revolut are quickly accumulating millions of customers with a slick user experience and targeted products. With PSD2, the compartmentalisation of financial services typically only offered by banks is made possible. Consumers can control who can access their personal data and can choose only to share information when it benefits them. A new ecosystem is sprouting in which consumers have more control and choice.


How is the secure sharing of private customer financial data made possible? Application Programming Interfaces, or APIs, connect systems and ensure that they can talk to each other. APIs are driving collaboration and innovation between banks and third-party companies. As the line between tech and financial institutions is further blurred, banks are becoming more tech-savvy. You might think people would be hesitant to let a tech company handle their finances, but they already are. 66% of young Americans are using Venmo in the U.S. to pay their friends. And it’s not just consumers who are getting involved. Leading digital payment processor, Square has more than 7 million retailers using their payments platform to process transactions more quickly and inexpensively. Technology companies already have our data, attention and trust... now they’re following the money.

The Fintech Revolution

What will be the impact of unbundling banking? How will new regulation change how we interact with our money? It’ll be cheaper, more transparent and easier to access. The silent minority of the unbanked, estimated to be 30% of the world’s population, will finally have access to financial services. Data ownership will no longer be murky, hidden deep down in the T&Cs. The aim of Open Banking is to put customers back in the driver’s seat. People will finally take back control of their data and ownership of their information.

To find out how Fidel's democratising access to payment data, check out our blog.