On 9 August 2016, following their retail banking market investigation, the Competition and Markets Authority (CMA) concluded that large banks well established in the personal and small business retail market do not have to compete hard enough for customers with smaller and newer banks.
To tackle this issue, and to enable customers to make more informed choices when deciding which bank to open an account with, the CMA has adopted several new requirements to which retail banks in the UK will have to adhere to. These include:
Allowing customers access to their own information:
Implementing ‘Open Banking’ by 2018, which will enable personal and small business customers to share their data securely with other banks and with third parties, so that they will be able to manage their accounts with multiple providers through a single digital application. This is expected to assist customers in improving their management of funds (e.g. avoiding overdraft charges, or controlling their cash flow more effectively), as well as in comparing various products offered by banks as appropriate to their needs.
Customer feedback and reviews:
Requiring banks to publish accurate and impartial information on their websites and in their branches relating to the quality of their service, so that customers can more accurately assess their options in the retail banking market. The extent to which customers would recommend their bank to family, friends and colleagues is an example of one of the planned range of service quality measures to be included in reports made available through Open Banking.
Informing customers of bad news:
Ensuring that banks regularly send adequate notifications to their customers to inform them of such occurrences as the closure of a local branch or an increase in their charges, for example. Furthermore, banks are asked to remind their customers to review whether they are getting the best available service for their particular requirements. Banks will also be required to notify customers that are going into unarranged overdraft, and inform them if there is a grace period, so they can avoid unnecessary charges – further to this, charges for unarranged overdraft will now be capped.
Advice for SMEs:
There was the concern that incumbent banks do not have to compete hard enough to retain their existing customers when those customers seek SME loans and business current accounts. Banks will now offer the independent charity Nesta financial and technical assistance so that they can better provide small businesses with tools with which to access more comprehensive information regarding bank charges, quality of service, credit availability and so on.
Through these new measures, which are in large part making use of new technologies to modernise the customer experience, the CMA hope that individuals and small businesses will have access to more accurate and more extensive information about their bank’s products and services, and how their own funds are being managed, as well as the other potential options provided by the wide range of banks in the retail market. This in turn, it is hoped, will allow customers to make more informed choices regarding their which bank and which service they should give their custom to, and this is expected to result in an increase in customer movement between banks, and greater competition within the market.
CMA retail banking market investigation & remedy proposals: https://assets.publishing.service.gov.uk/media/57ac9667e5274a0f6c00007a/retail-banking-market-investigation-full-final-report.pdf