Over the past half a decade or so, Fintech has possibly been the most important development in the world of finances and now it is a multibillion-dollar industry has the potential of upending the way in which people use money. Fintech may have started off as a way of developing more advanced and faster payment systems, but now there are actual banks which are completely powered by it. Companies like Monzo and Revolut have started a revolution of sorts by establishing Fintech, and now applications are going in fast from other companies who wish to establish such banks. However, it has now emerged that regulators are going to be far more stringent with their scrutiny when it comes to green-lighting such as banks.
In fact, it is only natural considering the fact that there is always the possibility of unscrupulous companies setting up Fintech banks and taking their customers for a ride. When an industry truly explodes, all kinds of pretenders try to make a quick buck and hence the heightened regulatory scrutiny is a natural progression. The Prudential Regulatory Authority (PRA) reined in the number of approvals alarmingly in the 12 months until February 2019. The regulatory body approved only 4 Fintech banking licenses and it is a drastic drop from the 12 licenses that it had approved in the preceding period.
The drop is a clear indication that the PRA has now become far more stringent with its scrutiny and in the coming years, it is going to be quite tough for companies to get approvals for Fintech banks. However, James Borley stated that the drop in approvals is not a case of the PRA trying to set up barriers to entry into a booming industry but are in fact eager to see new participants enter the industry. He said,
“[PRA] operates with a presumption towards increasing competition in the banking sector, and is keen to see new banks enter the market. Potential applicants should be aware that none of the regulator’s challenges are insurmountable – the right preparation can ensure the process runs smoothly.”