According to media reports, Mambu will be Bó’s core banking technology provider. RBS announced the launch of the digital-only bank last autumn, and in January made a 25% investment in e-money start-up Loot through Bó.
RBS is among several major investment banks which have launched fintech ventures, including Barclays, Goldman Sachs, Citigroup and Standard Chartered, in a trend showing their willingness to develop consumer-focused ventures to capture deposits and create payments capabilities.
Banking expert Andrew Barber of Pinsent Masons, the law firm behind Out-Law.com, said the moves were part of a growing trend for mainstream banks to embrace open banking reform which was kickstarted by the introduction of the second Payment Services Directive (PSD2). The changes were also driven by the second Electronic Money Directive which allows financial technology firms to register as e-money issuers.
Meanwhile the UK’s new payments architecture will allow multiple providers of overlay services to facilitate payments in an open system.
“Fintech disruption is unlikely to confine itself to retail banking, as corporate expertise is gradually developed by start-ups,” Barber said.
However the amount of regulatory obligations and the design of some of the legislation governing open banking could deter challenger firms from entering the market, and bank account holders from switching to start-up providers, said financial regulation expert David Heffron of Pinsent Masons.
Heffron said for example that the PSD2 technical standards are viewed by many as prioritising security over seamless design, with multi-factor authentication required to complete a transaction. Meanwhile money-laundering rules limited the speed at which fintechs could bring on board new customers.
A recent report by the Bank of International Settlements (BIS) into the entry of big technology companies into financial services (45 page / 1.25MB PDF) suggested that challengers to traditional banking have adopted and reinforced current payment schemes in well-established financial systems, as they have found it easier to become an indirect market participant.
There was also little incentive for fintech companies to incur the costs required to alter customers’ habits in card payments, Heffron said.
“In much the same way that payments is no longer the preserve of traditional banks, fintech is not exclusively the domain of start-ups and multinational tech giants,” Barber said.
“Out of necessity to defend their market share, and recognising that the tide of regulation and commercial reality isn’t flowing exclusively in one direction, banks have begun to build or invest in ventures which rely on the same regulatory innovations and consumer demands as their new competitors,” Barber said.