The Intermediary – September 2025 - Flipbook - Page 92
T E C H N O L O GY
Opinion
The real risk is
doing nothing
T
he Prudential
Regulation Authority
(PRA) regulates around
1,500 banks, building
societies, credit unions,
insurers and major
investment firms in today’s market
and was born out of the mess le in
the aermath of the Credit Crunch
in 2008.
Its role is to ensure firms do business
safely and to reduce their chances of
geing into financial difficulty. The
aim is to ensure that the financial
services and products that we all rely
on are provided in a way that does not
put customers, their money or the
economy at risk.
The Bank of England defines the
PRA’s systemic responsibilities for the
layman as: “If banks stopped working,
the entire economy would grind
to a halt.”
This is vital when it comes to
financial services in the UK, which
in 2023 contributed £208.2bn to the
UK economy, equal to 9% of total
economic output. It is the fourth
largest industry when it comes to GDP.
It’s also a highly complex industry,
including in the retail banking
marketplace. This market is mature
and developed. It is heavily regulated.
It is responsible for individuals’,
businesses’ and the Government’s
financial welfare. As we saw in 2008
and 2009, when it falls over, well, it’s
just not an option. We are still paying
the price for the aermath of the
Global Financial Crisis.
It’s this that makes change in the
mortgage and savings market a much
harder journey than in many other
walks of life.
Yes, there is widespread recognition
that technology is outdated.
Origination platforms are restrictive.
Product design and underwriting
is still heavily reliant on manual
processes in more specialist parts of
the market and in lenders outside
of the biggest banks and building
90
The Intermediary | September 2025
societies. Customers’ data may be
exposed to harm as a result.
Application process, case
management and third-party
integrations are oen less than
desirable. The investment risk is a
barrier. The transition risk is a barrier.
The regulatory risk is a barrier.
Changing tides
It doesn’t need to be this way. As a
market we need to start thinking
about technology adoption with a new
mindset – one that is appropriate for
the tech that exists today. The beauty
of cloud-based services is their ability
to flex and to integrate.
There’s a reason we have a tripartite
regulatory structure in the form of the
Bank of England, PRA and Financial
Conduct Authority (FCA). Each has a
mandate to prioritise.
The flipside to managing prudential
risk is the risk to consumers
engaging with financial services.
The recent Mortgage Rule Review
and introduction of the consumer
duty in 2023 create another set of
considerations for lenders when
thinking about how they manage risk
– there must be a balance.
On the consumer side of the
coin, the FCA is clearly commied
to simplifying the rules around
remortgaging on a like for like basis,
addressing vulnerability before it
becomes a debilitating issue and
ensuring good outcomes where
foreseeable and possible.
This is a positive aim and can only
serve to improve the market and
customer experiences. Delivering
against the FCA’s expectations given
the limitations that legacy technology
imposes, however, is harder.
As with all guidance that issues
from the FCA, how lenders meet
their regulatory responsibilities is
down to them.
Process for a high street bank’s
business model will differ hugely from
the way things are done in a small
JERRY MULLE
is managing director at Ohpen
regional society or a specialist lender
operating in the near-prime space.
This makes the playing field uneven,
and it is fuelling the tendency all
humans have, which is to delay
big decisions. This gets to the heart
of the challenges faced by lenders
today – is the risk of doing nothing
worse or beer than doing something
which may or may not improve
the situation?
The answer to this question is a
set of scales, but one that is tipping
further and further towards doing
something. The question then, is
how you achieve this and mitigate
transition risk to the best of
our ability.
Utilising cloud-based services
and platforms enables lenders
to manage change safely, one
step at a time over a timeframe
that allows for troubleshooting,
training and responsible, robust
customer management.
Using integrators that really
understand how to immerse this
technology into a business and
address the cultural challenges that
accompany upheaval is also key. From
boardrooms to shop floors there are
plenty of issues to consider but, they
are manageable with the right people
and technology mix.
Not only this, it allows lenders
to manage more of their regulatory
risk beer, more comprehensively
and efficiently. It supports clearer,
more robust reporting and oversight
through more granular management
information. Legacy thinking is
possibly the biggest hurdle lenders
must address. ●
