Senior Bank of England executive Andy Haldane has backed calls for the creation of a shared database for the storage of customer account details, arguing that the move would help boost competition in financial services.
In a speech at Occupy Economics' Socially Useful Banking event on Monday, Haldane, executive director for financial stability at the BofE, bemoaned the fact that - until Metro arrived on the scene in 2010 - no new bank had been set up in the UK for a century.
Although cautioning that there is no "silver bullet" to the problem, Haldane said he is attracted to the prospect of putting some core banking services in the hands of a shared utility, storing customer account details.
"With customer information held in a network utility, like the electricity grid or railway network, banks could plug and play when offering deposits and loans to customers. The costs of entering the banking market would be lowered for new banks. And so too would the costs of searching and switching for customers, between banks and between products, rather as you might between gas or mobile phone suppliers," he told the audience.
Last year the Independent Commission on Banking did set its sights on the often difficult process of account switching as part of its push for increased competition in the sector. Initially the Commission looked at full account number portability but in its final report settled for an emasculated "redirection service", deciding that it can deliver many of the same benefits at a lower cost.
The bank-owned UK's Payments Council's board then gave the go-ahead for the project, committing up to £850 million for the service, which is slated to go live next September.
With the new service, at least one strong new player will enter the market - retail giant Tesco has publicly stated that it is waiting for the system before launching its current account.
In his speech, Haldane said that there are already some encouraging competition signs and that "in weak moments, I think that we might even be on the cusp of a technological revolution in banking", citing the growth of mobile services and new non-bank services such as peer-to-peer lending, crowd-funding, invoice-financing.
However, the central bank man also highlighted the value of more old-fashioned banking, focussed on local, relationship-based retail services, exemplified by Swedish-owned Handelsbanken, which has been quietly building up its UK operations, and now has a network of over 100 branches, opening a new outlet every two weeks.
Said Haldane: "Their business model is fascinating, Quaker-even, in its orientation. They offer only basic banking services, mortgages and small business loans, to people in a tight, locally-defined catchment area. All credit decisions are taken locally by people, not centrally by a computer. No bonuses are paid and no-one has a sales-target. When the whole firm out-performs, a contribution is made to a pooled fund which is invested on employees' behalf. The fruits of success are distributed equally and gratification is deferred."
This "back to the future" banking can thrive if people reward it with their patronage, Haldane told the Occupy audience in a speech in which praised the movement, insisting that "Occupy's voice has been both loud and persuasive" and "policymakers have listened", even claiming that "we are in the early stages of a reformation of finance, a reformation which Occupy has helped stir".
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