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Is today a good day to become a bank? Maybe... Maybe Not!

When George Osborne announced that newly established challenger banks would no longer be exempt from the 8% tax that applies to the biggest banks, many of those at the helm of these new businesses will have swallowed – hard. They had expected to be let off, arguing that the levy should only apply to global banks of systemic importance, not the smaller players who do not bring this same risk.

Having worked in the financial services sector for many years, including my current role as the founder of a digitally enabled banking company, this has made me think – is now really a good time to become a bank?

In fact, to try and become a bank would seem to me to miss the point of FinTech and digital services entirely. Never has it been easier to provide banking services, without being 'a bank'. Bill Gates stated in the 90's: "Banking is necessary, banks are not."

Despite the widely held acknowledgement that we need to breathe fresh competition into the retail banking market, there is no denying that the current environment – particularly this tax – is not conducive to encouraging challengers. To me, this tax highlights the dichotomy between the incumbents and the challenges in the financial services sector. This second group want to shake up the status quo and do things differently. However, certain rules must apply. No regulation, no credibility. That said, never has the word 'bank' been so easily divorced from 'provision of banking services' - the FinTech revolution has seen firms rise up and optimise niche offerings, aimed at specific customer segments, rather than try to compete on all levels like the banks.

APS is not a bank. But over the last ten years, we have pieced together an institution that looks very much like a bank. We're able to offer current accounts, business accounts and credit offerings including overdrafts, and credit cards. We facilitate banking services via digital and mobile solutions providing banking services without being a Bank. We do all this as an e-money regulated firm, often much more efficiently than the banks.

This didn't happen overnight. We've broken down a series of significant barriers over the last ten years to arrive at where we are today. We became the first non-bank issuer to gain MasterCard membership in 2007, and recently became the first FinTech player to link up with the Post Office – a much needed move to level the playing field between the banks and alternative FinTech providers. As a member of the European Retail Payments Board and the Emerging Payments Association, I am currently lobbying to open up systems, such as Faster Payments and Bacs to non-traditional banks.

The term 'bank' will continue to evolve, as FinTech firms increasingly use APIs and web services to collaborate. Current constraints mean that our back-end infrastructure may not look the same as a 'bank bank' – but without the regulatory burden that comes with being a bank, and the offer of easy, digital services for our customers, we're not missing out. And we don't think our customers are either. 


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