The Competition and Markets Authority (CMA)’s retail banking market investigation has been published, which explains how larger and older, well-established banks currently enjoy significant advantages when it comes to securing business from customers. This lack of competition means that consumers pay more for banking services in many different areas.
The new measures announced by the CMA include:
• A requirement for all banks to fully implement Open Banking by early 2018. Open Banking is concerned with how data sharing between banks and financial institutions can be used to help people when conducting financial transactions. It should allow customers to manage their accounts with different providers via a single ‘app’, and to compare prices, standards and the location of branches via the same app. It will require customers to consent to their bank sharing their personal data with the technology provider
• New obligations for banks to publish information on their quality of service on their websites and in branches
• A requirement for banks to prompt customers before events occur such as their local branch closing, or the charges on their financial product increasing
• A cap on the fees that can be charged for unscheduled overdrafts, although each bank will be able to set their own cap and no minimum industry standard will apply
• A promotional campaign to encourage more people to switch accounts, backed up by an extension of the length of time people have to re-direct transactions to the new account, and by a new regulator for the Current Account Switching Service
Alasdair Smith, who chaired the investigation, said:
“The reforms we have announced today will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks.
“We are breaking down the barriers which have made it too easy for established banks to hold on to their customers. Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.
“Our central reform is the Open Banking programme to harness the technological changes which we have seen transform other markets. We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs.
“This is backed up by a wide package of measures to improve the current account switching service, to make it easier for small businesses to shop around and open new accounts or get a loan, and to see how the quality of service provided by your bank compares with other providers.
“We are also taking measures to give customers much greater control over their overdraft charges, so that they are clearly told when they are about to be incurred and have an opportunity to avoid them. Alongside this, banks will have to cap their monthly charges for unarranged overdrafts.”
Some organisations reacted to the report by suggesting it did not go far enough.
Alex Neill, director of policy and campaigns at consumer organisation Which?, said:
“It is disappointing that the monthly charge cap is not actually a cap and banks will be allowed to continue to charge exorbitant fees for so-called unauthorised overdrafts, rather than protect those customers that have been identified as among the most vulnerable.”
Andrew Tyrie MP, chairman of Parliament’s Treasury Select Committee, suggested consumers would be wary of the data security implications of the Open Banking technological advances.
Craig Donaldson, Chief Executive Officer of Metro Bank, expressed his dismay that the report did not address the issue of capital requirements, which he says disproportionately favour the larger banks.
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article.