- Regulation is about aligning private and social trade-offs.
- When banks cause negative externalities, good regulatory interventions increase banks’ costs.
- Externalities may differ across countries, so nothing suggests that regulation induced costs should be the same internationally.
The Economist reports that forthcoming European payments regulation has the potential to disrupt the industry.
Provided the customer has given explicit consent, banks will be forced to share customer-account information with licensed financial-services providers.
… payment services … could become more integrated into the internet-browsing experience …
With access to account data … fintech firms could offer customers budgeting advice, or guide them towards higher-interest savings accounts or cheaper mortgages. Those with limited credit histories may find it easier to borrow, too, since richer transaction data should mean more sophisticated credit checks.
A progress update by the Bank of England describes the Bank’s intention, over time,
to extend direct access to RTGS to non-bank Payment Service Providers (firms granted the status of E-Money Institutions or Payment Institutions in the UK), collectively known as PSPs. By extending RTGS access, our objective is to increase competition and innovation in the market for payment services.
In an Ekathimerini article, Dimitra Manifava reports about the reform measures under way following recent negotiations between Greece and her international creditors.
- Banks increasingly face competition in bread-and-butter businesses like term deposits, lending and payments.
- Two trends shape the sector’s changes: Falling trust in banks, both at the political level and by individual clients; and the rise of the internet.
- Trust has been squandered. But with cheap access to information, it also has lost importance.
- Asymmetric information in financial markets might become less of a friction. This could turn into an existential threat for banks.
- When trust is less important and technology more versatile, increasing returns to scale in the provision of financial services might be a thing of the past. And so the universal bank. New regulatory and tax regimes could foster the process of structural change.
Here are some links to background information:
- SavingGlobal provides a marketplace for term deposits. It intermediates between German savers and European banks.
- Peer-to-peer lending gains market share, as reported by The Economist (25 October 2007; March 1, 2014; December 13, 2014; see also the Wikipedia page).
- Competition in other areas rises as well, see my earlier post on cross-border money transfers.