Banks told to make switching even easier

Alasdair Smith, chair of the retail banking investigation, said that the reforms announced today would shake up retail banking for years to come and ensure that both personal and small businesses to secure better deals with their banks.

The CMA’s final report on its retail banking market investigation concludes that “older and larger banks do not have to compete hard enough for customers’ business, and smaller and newer banks find it difficult to grow”.

The authority sees that as a problem and, in an effort to alleviate it, is proposing a requirement that banks in the United Kingdom introduce an open API standard by early 2018, which would allow both business and consumer customers to share their unique transaction history with other banks and trusted third parties.

The CMA has also introduced specific measures to benefit those who use unarranged overdrafts, gifting a total of £1.2 billion a year in charges into their banks’ coffers.

Ms Lewis said the CMA had also “failed to tackle excessive overdraft charges effectively”. At a time when 92%** of all current accounts for day-to-day customers charge an account fee and/or an overdraft usage fee, it’s little wonder consumers feel they have little incentive to switch. Unlike large banks, we do not pose a systemic risk so should not have to adhere to the same capital and regulatory requirements as them.

“We are in an uncertain environment for the United Kingdom economy and all moves to support our smaller businesses should be welcomed”.

A Bank of Ireland UK spokesperson said the CMA report “includes a substantial package of measures created to improve transparency and increase levels of switching in the market”.

It has rejected the idea of breaking up the biggest banks and also stopped short of getting rid of “free if in credit” current accounts. “Our reforms will increase innovation and competition in a sector whose performance is crucial for the United Kingdom economy”.

The Current Account Switch Service (CASS), which allows people to move bank account in seven days has been successful in terms of what it offers, but right now just 3% of personal customers switch to a different provider each year. “Measures will include publishing information on service quality, issuing alerts about impending overdrafts or service changes and most importantly, to enable customer data to be shared with other banks and third parties”, he said.

“The CMA was given a rare opportunity to support and develop competition in banking”, said Craig Donaldson, chief executive of Metro Bank.

“There should be a cap on unauthorised overdraft charges and it must be set independently by [regulator] the Financial Conduct Authority, not by the banks themselves.

With new banks coming to the market with more innovative and targeted offerings, the percentage of people switching services in the future will certainly increase”.

The married Lloyds Banking Group chief executive reportedly ran up a bill of nearly £4,000 at the luxury Mandarin Oriental, the Sun said, although it was unclear whether the tab was picked up by him or by the bailed-out bank.

Other fees include charges to withdraw cash overseas and the hidden cost of not earning interest on credit balances.

“The technology is already there, and this may be the step consumers need to understand how greater control over their data could also help them gain better access to finance”, he said.

Shares in the big banks rose following publication of the CMA’s report but PwC said the watchdog’s bid to unleash a revolution in mobile banking could prove costly.