UPDATE 4-Britain counting on fintech for banking revolution

* Watchdog sticks with proposals outlined in May

* Focus on a fintech "revolution" in banking

* Consumer group disappointed with overdraft action

* UK lawmakers sceptical, to quiz watchdog on plans (Adds UK lawmaker comment)

By Huw Jones and Andrew MacAskill

LONDON, Aug 9 (Reuters) - British banks will from 2018 haveto share customers' data with third parties who can then showhow much could be saved by using other lenders, the competitionwatchdog said on Tuesday.

New banks, consumer advocates and lawmakers, however,derided the plans as relying too much on people's ability andwillingness to use new technology.

Customers are paying more than they should for banking andare not benefiting from new services, the Competition andMarkets Authority (CMA) said in its final report after athree-year review of consumer and small business banking.

Financial technology, or "fintech", companies are expectedto offer smartphone "apps" and web sites that use customers'information to enable them to compare bank charges.

The CMA believes setting a 2018 deadline will also boost the"fintech" sector, which uses technology to make financialservices cheaper and more efficient.

The government wants to see fintech grow, but European Unioncountries like Germany would like to lure the sector from Londonafter Britain voted to leave the bloc.

"This is a real opportunity for the UK to take the lead. Weare going to make it happen and give it a push to get it acrossthe line," Adam Land, a senior director at the CMA, said. "Thereis no question that fintech companies are champing at the bit."

High street banking in Britain is dominated by the "bigfour" lenders - Lloyds Banking Group, Royal Bank ofScotland, Barclays and HSBC - whichcontrol more than three quarters of current accounts and providenine out of 10 business loans.

Only 3 percent of consumers and 4 percent of businesscustomers change banks in any year due to inertia.

The CMA hopes its proposed measures, which differ littlefrom draft measures outlined in May, will make it easier forpersonal and small business customers to switch lenders, butsome smaller banks and consumer groups said the new measureswere not radical enough.

NOT GIVING UP

Andrew Tyrie, chair of parliament's Treasury SelectCommittee which has pushed for six years to get more competitionin banking, said he was not optimistic the measures will get tothe heart of the problem.

The measures rely on new technology to do the heavy liftingwhile customers were understandably wary of sharing data, andthe committee will ask the CMA to justify its proposals in theautumn, he said. "We are not giving up now," Tyrie added.

Under the new rules, banks will have to share a customer'sdata with third parties, providing the customer agrees.

Aldermore, one of the new "challenger" banks thegovernment hopes will eat into "big four" dominance, said theCMA has missed a huge opportunity to provide a real, positiveeconomic impact.

The CMA could have gone further by recommending that smallbanks have more proportionate capital requirements, it said.Challenger banks have called for lower capital requirements thanbig banks, arguing they pose less risk to the financial systemthan bigger rivals.

The CMA will also require lenders to publish their maximumfee for unarranged overdrafts, which earn banks 1.2 billionpounds ($1.6 bln) a year.

Consumer group Which?, however, said that measure did not gofar enough as banks would still set the maximum rate and sowould be able to continue to charge "exorbitant fees".

Land said the Financial Conduct Authority (FCA), whichcapped payday loans' interest rates, will review the overdraftmeasures and obstacles to new entrants to see if they improve,but Rishi Khosla, co-founder and CEO of OakNorth Bank, said this"passing of the buck" to other market watchdogs could put manyfledgling companies at risk.

"The fact that the CMA is simply going to pass the buck tothe Treasury who won't look to launch their own investigationuntil two years from now is extremely disappointing," Khoslasaid.

"There are millions of SMEs (small to medium enterprises)that are struggling to secure growth capital who may now need towait up to four years for the situation to improve."

Land said allowing banks to set their own cap gives themflexibility to compete with each other on offering the lowestoverdraft fee, but consumer advice bodies were unconvinced.

"The FCA should be prepared to step in with an industry-widecap if they (the banks) do not significantly reduce the chargesbeing paid by people who fall into difficulty," said MoneyAdvice Trust, a charity that helps people deal with debt.

The Financial Services Consumer Panel, which advises theFCA, said the measures rely on untested technology and consumershaving to act on complex information. "At least it has given theFCA some good evidence to take on the banks." ($1 = 0.7701 pounds) (Additional reporting by Sinead Cruise; Editing by Jason Neely,Susan Fenton and Adrian Croft)