Fintech Headlines 19.7.2021

1. The USA President Joe Biden issued a number of executive orders aimed at promoting competition in various sectors including financial services.

One of the orders addresses the issue of "excessive bank mergers”. The U.S. has lost around 10,000 banks, or 70%, over the past 20 years! The mergers decrease competition, raise costs for consumers, restrict credit for small businesses, and harms low-income communities.

Another order deals with customers right over their financial data. TheWhite House plans to encourage financial data sharing in the banking industry. The Consumer Financial Protection Bureau already issued a proposition of law that gives consumers the right to access their financial information held by a bank. Possibly White House’s executive orders will encourage the agency to push ahead with those changes. This may lay a foundation for Open Banking in the US.

2. Chris Skinner with another great post on digitization of banking services and the question on how to incorporate human presence in digital first financial institutions.

I definitely agree that while the future is technology driven, and people will prefer to do most of the financial operations from their mobile device, human interaction cannot be completely replaced. People need people and trust is built upon interpersonal connections.

3. post about the risk traditional financial institution take when ignoring underserved customers

FinTechs are ready to go after traditional bank’s consumer bases, looking first and foremost for the underserved consumer. Until now we mostly heard about fintechs serving unbanked consumers. Totally unbanked consumers are only 6% of the U.S. population.

Underserved consumers, however , are a much bigger audience.

By adding added value services such as P2P payments, credit building, bill payment capabilities, buy now, pay later (BNPL) and financial wellness as part of their mobile experience fintech go beyond basic banking and create a whole ecosystem that serves the consumer better and may offer customized offering depending on the client’s needs. While many of these customers are not of high interest to the banks, they do bring a big share of the bank's revenue. If the traditional banks will not address the client’s needs, the users may shift to a neobank that better suits their needs.

In my opinion, it is true that neobanks do offer a wider range of additional financial services. However, the share of neo banks is still small, The acquisition of new customers is expensive and takes time. Some of them did have hard times during the pandemic as they serve less stable segments of the population. There are still a lot of embedded relationships with traditional Financial Institutions and even dependencies on these institutions. Thus, while some neobanks will survive the race and grow, in turn becoming a big financial institutions themselves, may will be acquired by the traditional financial institutions. Let’s just hope that these institutions will use the available technology to enrich their product offering.

4. The FCA raises concerns following an assessment of retail banks' financial crime systems and controls.

Among the areas of concern are governance and oversight, risk assessments, due diligence, transaction monitoring, and suspicious activity reporting.

The banks are required to perform "gap analysis" by September and then take "prompt and reasonable" steps to close the gaps.

5. UK police have made the UK’s largest cryptocurrency seizure worth nearly £180 million, this follows a confiscation of £114m of the cryptocurrency in June. Police deputy: “While cash still remains king in the criminal word, as digital platforms develop we’re increasingly seeing organised criminals using cryptocurrency to launder their dirty money.”

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