Part two of this Cebr report, commissioned by Fiserv, looks at changing trends in the UK banking sector, and the ways in which this different environment is positive for both potential new entrants and for consumers.
The rise of new technology brings with it new challenges for banks, particularly in the rise of alternative finance. The internet makes it much easier for small and medium-sized businesses to access funding through crowd-based solutions, such as peer-to-business lending. While this is a tiny proportion of the overall lending market for now, it is seeing very rapid growth. Regulatory change also makes it easier for SMEs to get funding through other channels, such as credit unions. These trends are important, as SMEs are often unsatisfied with their banking relationship, and as such provide a real threat to banks retaining small businesses as customers.
Additional regulatory change has come through that aims to make it easier for new banks to enter the market. While there are signs that this is having some positive effect, there are concerns that more may need to be done to break the hold that the biggest banks have on market share. In addition, regulation following the financial crisis that aims to reduce systemic risk hits smaller banks disproportionately, making it more difficult to do business.Download