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The week in fintech: In UK, open banking paves the way for overseas players


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The week in fintech: In UK, open banking paves the way for overseas players

This recap features updates on bank technology, payments, online lending and other news in the U.S. financial technology space. Send tips, ideas and chatter to For other recent fintech news, click here.

Thanks to an open banking system in the U.K., foreign banks can now get a foot in the door without siphoning off deposits from existing banks.

Open banking regulations, which launched in January, allow users to control their own data and share it across platforms as they choose. For example, if a customer banks with Barclays PLC but prefers HSBC Holdings PLC's banking app, open banking allows that person to cross-use all of those features, said Jamie Campbell, head of awareness at Bud, a U.K.-based financial network that is enrolled in open banking.

That has allowed new banks to set up shop in the country based solely on the digital access to different banks that open banking gives customers. Switching bank accounts altogether had been a "stagnant" trend in the U.K., Campbell said in an interview, but now, there is "competitive choice around the channels in which people are engaging with their money."

"There are some banks setting up in the U.K. which don't even have balance sheets," Campbell said. "They just use the open banking standards to offer a daily banking service, [like] the ability to check the finances of all your accounts, and then leverage the parties within the app to offer [additional] services like currency exchange, wealth management, insurance or utility bill switching."

Open banking should also make the relationship between traditional banking and digital lending more streamlined, he said. The rules should impact lending more than deposits, he said.

On the lending side, rather than filling out multiple separate forms, a customer can import his or her data across platforms to speed up the process. Bud, one of the regulated open banking companies, is attempting to consolidate all the financial services people use into one platform, including customers' various bank accounts. This aggregation allows the company to run pre-approvals for lending based on a customer's entire body financial information, Campbell said.

There are 23 companies currently regulated and enrolled in open banking at this point, according to the U.K.'s open banking website. To be a provider requires minimum standards that companies must meet as an account information service provider and mandates that the company honors customer requests as a payment initiation service provider.

Campbell said many companies have decided open banking is not core to their business right now and are not making it a priority. It could take a year from start to finish for a company to become regulated under the rules, he added.

"Normally, the response we hear from companies is the fact that, yes, open banking is definitely something they want to engage with and should be engaging with, but currently, the barrier to get involved with it is very high and the payoffs from starting the process are quite delayed," Campbell said.

In other digital lending news, LendingTree LLC, a unit of LendingTree Inc., closed its acquisition of Ovation Credit Services Inc. on June 12. LendingTree shares dropped 11.79% to $254.40 at market close on June 15 from its June 12 opening price of $288.40.

In cryptocurrency news, SEC Corporation Finance Director William Hinman said ether should not be subject to SEC regulation, indicating that the top official believes the Ethereum token is not a security.

Wells Fargo & Co. was the latest bank to ban its customers from using their credit cards to buy cryptocurrencies. Banking giants Citigroup Inc., JPMorgan Chase & Co., and Bank of America Corp. have previously limited cryptocurrency purchases on their credit cards, citing market volatility and credit risk as major concerns.

Coinbase Inc. announced that it is adding support for Ethereum Classic "in the coming months." It also opened its index fund to accredited U.S. investors.

Elsewhere in fintech, initial public offerings continue to make headlines. Germany's solarisBank AG will reportedly look at an IPO as a possible financing option. I3 Verticals Inc., a payments software company in the U.S., expects its IPO to be priced between $11 per share and $13 per share.

And shares in Dutch payment solutions provider Adyen NV's planned IPO are expected to be at the top end of the €220 per share to €240 per share indicative price range set earlier in June.

From June 8 to June 15, the SNL U.S. Financial Technology Index rose 4.16%.

A recent report from S&P Global Market Intelligence explores how banks and insurers are embracing fintech innovation. The report looks at recent trends and provides outlooks for the insurtech, digital lending, digital investment management, digital banking, payments and distributed ledger technology sectors. Click here to read the report.