Fintech start-ups set to profit from new regulations

As new banking regulations come into effect in Europe this month, a number of small UK fintech companies are poised to take advantage.

The introduction of the Second Payment Services Directive (PSD2) this month has brought open banking to the UK, and financial institutions are grappling with the opportunities and challenges presented by the changes.

Advantages

Under open banking, banks have to make customers’ financial details available for sharing with third parties. This is likely to lead to a shift in the role of banks from all-inclusive financial centres to open platforms, through which customers can access the services of numerous financial providers.

HSBC UK has already introduced a new app that should allow customers to see all their accounts through one screen, even if they are a customer of a different bank.

Financial start-up companies such as iwoca, which provide small business loans, are preparing to take advantage of the new operating environment. Before PSD2, iwoca would have to take information from PDF statements submitted by customers and then use their software to make decisions on credit.

However, with open banking, they will have quick access to banking data, and this will minimise the risk of human error or fraud.

Seamless

According to iwoca CEO Christoph Rieche, being able to access transaction data in real time presents major opportunities for his company and others like them: "Up to today it has been very hard to get that information in a truly verified and seamless format.

 “I believe open banking makes this data flow a lot more securely and seamlessly and there will be higher adoption due to the increase in speed.”