This month on the Digital Banking Hub
UK’s sweeping delay, 90-day reauthentication rule eliminated, credit unions focus on wellness
Rulemakers have been polishing their pencils in recent weeks, with a number of announcements from regulators looking likely to impact digital banking.
In the UK, market participants breathed a sigh of relief when the Competition and Markets Authority (CMA) decided it would delay the mandating of variable recurring payments (VRPs) by six months, until July. The delay is especially good news for compliance departments which will have to navigate how sweeping will change consumer banking.
While institutions may be concerned about the disruption to traditional recurring payments methods – notably direct debits – there is a wealth of opportunity for those that approach VRPs correctly.
“The banks that get these new payments right will enjoy a reputational uplift as their customers start to see the benefits of sweeping and automated payments,” we wrote in our recent piece on the Digital Banking Hub. “Those that get it wrong will experience the opposite effect, which means it is important to make sure the introduction of VRPs goes as smoothly as possible.”
While the delay gives UK financial institutions time to weigh up how sweeping will alter their digital product range and journeys, the cancelation of the 90-day Open Banking reauthentication rule also requires thought.
Currently, users must repeat the strong customer authentication (SCA) process with each of their banks every 90 days to confirm authorization of data sharing with third-party providers (TPPs). The new rules – enforceable from March 26, 2022 – require banks to authorize only on first access. In theory, customers will face a smoother journey.
“Banks, currently shouldered with the responsibility of ensuring the 90-day requirement is met, have welcomed the suggestions: they can disable the function and chalk it off as one less compliance check box,” we wrote of the ruling. “For fintechs and TPPs the rule has caused a 50% drop off of users in some instances. Those organizations that rely on sustained data access – such as those that provide consumers with money management insights and assistance – the current rule is ruinous. Such is the case therefore for aspirations of Open Finance.”
As part of our research, we closely monitor how US-based credit unions are engaging with their members digitally. Over the past year, financial wellness has become a core consideration, with many now offering personal financial management (PFM) tools such as budget and goal-setting. Of the credit unions tracked by the Digital Banking Hub, more than 40% now provide users with suggestions on how to improve their credit scores. Brands including Digital Federal Credit Union and Uncle Credit Union go a step further and offer content for customers struggling with debt.
The month ahead
Spanning retail, small business, mortgage and unsecured lending, robo-advisor investments and credit cards, Digital Banking Hub users can make more informed strategic decisions based on our ongoing analysis. We provide information and diagnostics on onboarding and servicing within each of these areas for leading banks, credit unions, fintechs and other lenders.
Moving into the new year, we’ll be featuring a number of videos from our analysts in which we discuss the innovations that have lit up digital banking in the past few months and what to expect in 2022.
Subscribers will see some fairly big changes over the coming weeks, including a whole new Insights Explorer to help users predict changes with in-depth analysis and best practices from across the competitive landscape.