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.
While the idea of a shared customer database may indeed spur increased competition and offer value for customers, such issues as privacy and security would undoubtedly be top-of-mind.
With current systems, customer data is protected from within the firewall of each financial institution, which is reasonable consistent and generally quite secure. Should a new entity be created to house data from disparate systems and institutions, there would be multiple layers of data and security, and increased opportunities for potential data breaches and phishing attempts. It will be interesting to see how industry leaders and customers react to how best to encourage, and manage, account switching.
Click here to read more from Finextra.