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Starling Bank accused by Fintech companies

 Anne Boden, the chief executive of Starling Bank, has been accused by more than 50 fintech company founders of stifling innovation after saying that Britain’s open banking regime had failed.

The group, which includes the bosses of the fintech firms LendInvest, Zopa and Nested, wrote to MPs this week describing Boden’s comments during a Treasury select committee hearing as “uncompetitive and typical of banks trying to thwart the future of innovation in financial services”.

Boden, 61, told the hearing on the future of financial services that the government-backed scheme launched three years ago had failed to encourage people to switch banks.

“Customers are not influenced to switch banks because they can take their data with them. They switch banks because they want better service,” she said. While many fintech companies were set up to use open banking data, “nobody had a business model, because nobody is prepared to pay for that data”.

She added: “Sometimes, you have to realise that it is not solving the problem and that other things are more capable of encouraging customers to switch.”

Starling, founded in 2014, has 2.5 million customers in the UK.

Boden told MPs that she hoped her comments would be received right since Starling is a new bank and a fintech.

Members of the Fintech Founders network described Boden’s assertion as a “dramatic oversimplification of the proposition provided by open banking”, citing benefits including greater security and transparency and a faster, more streamlined way of accessing financing. They urged MPs to back open banking and call out banks trying to “stifle this innovation”.

Open banking was established when the competition authority ordered nine big banks to allow other parties, such as fintech, retailers and other banks, to have access to customers’ information, as long as they gave permission. The aim was to provide better deals on anything from overdrafts to energy bills.

Since the scheme was introduced, 330 companies have gained permission from the regulator to act as tech go-betweens to help consumers share their information.

“Although the technology has only been live since November 2018, open banking has already led to a whole host of new start-ups, raising hundreds of millions of dollars in new venture capital investment,” wrote fintech signatories of the letter to MPs. “There are now over 2.5 million open banking payments a month, compared to just 320,000 in 2018. Whilst the implementation has been far from perfect, and there are challenges, we are still in the early stages of the journey.”

According to UK Finance, there were 35.6 billion payments in total made in the UK in 2020.

Boden told The Times: “I’m one of the biggest advocates of opening up banking. I believe it’s all about taking on the big banks and changing them, and making things more competitive for consumers. But I speak the truth, and I’m pretty honest about when things are working and not working. So I want to open the debate because if things are not working, we need to fix them, and we need to fix them in the interests of consumers, not the fintech industry.”

Summarised www.sba.tax

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