Big banks in the United Kingdoms are now facing big challenges. Even though the five big banks control more than 80% of the retail banking market in the United States, they are no bigger than the UK open banking regulations. The new systems were put into effect in January this year.

As reported by Eduardo Roma and Standford Swinton in Forbes online, the new rules were mandated by the Competition and Markets Authority of the UK. They are also closely monitored by the regulators and bankers in the United States. In general, the new UK open banking regulations aim at fostering competitive markets and encouraging innovation in banking services.

What The New UK Open Banking Regulations Mandate

The new UK open banking regulations are good news for the customers. However, the big banks view them as challenges, due to the following reasons:

• The regulations require the banks to display fee data and performance. This way, it is much easier for the customers to compare the offers and results from different banks or financial institutions.
• The regulations also require the banks to implement open application programming interfaces (APIs). With the tools, the customers can easily share financial information. The interfaces also facilitate the customers in making transfer from their accounts, conducting transactions, and managing payments.
• The open programming interfaces make it easy for the customers to switch from a provider to another, as the barriers are removed now.

With the new rules, the big banks are worrying that their customers will switch to other financial providers that provide better offerings and results. They can easily take their accounts.  As a result, the banking profits could be reduced by about 10% to 20%. According to the estimates from Bain & Company, as much as £1 billion to £2 billion of pre-tax profits could loss within 5 years.

Why Do Big Banks Worry about The New Rules?

Recent surveys showed that UK big banks have some reasons to worry about the new UK open banking regulations. Why? Here are the reasons according to the surveys conducted by Bain, Salesforce, and MaritzCX to more than 4.000 banking customers in the UK:

• The survey showed that 63% of the respondents were willing to share their financial information to other competing banks, aggregator, or fintech that provides better offers.
• Certain segments of banking customers belong to high-risk category. They are open to appealing offers from disruptors
• The high-risk bank customers are mostly younger populations, with 55 years of age or younger and annual household income of £55.000 or more.
• The bad news is that these populations have adopted at least one alternative fintech solutions. Examples include Apple Pay.
• Younger populations account for no more than 20% of the total customer base in banking system. However, they make almost 45% of the bank profits.

The new UK open banking regulations can become substantial challenges for the big banks. The survey reported that most of the existing customers are ready to try new platforms offered by aggregates banking products, such as investment advice and insurance. These platforms can save money and streamline the financial transactions. So, why not?