Banks in the UK to face full competition inquiry
The Competition and Markets Authority has recommended that UK banks face a full competition inquiry.
The UK’s retail banking sector is lacking competition and needs to be subject to a full competition investigation, according to the Competition and Markets Authority (CMA).
Two studies conducted by the markets watchdog found that the existing range of options offered by the banking sector fails to satisfy the needs of either individuals or small businesses. As a result, it has now opened aconsultation on its decision to launch an in-depth market investigation that will focus on the markets for personal current accounts and banking for small and medium-sized businesses.
CMA has worked closely with the Financial Conduct Authority on both studies, and the findings are far from encouraging.
They find that there are still plenty of barriers to smaller banks entering and expanding into the market, and the market share of the biggest banks tends to stay roughly the same.
Most customers don’t see much different between the major banks on key services, and are less likely to shop around or switch bank accounts as a result – meaning that even those with the top scores on customer satisfaction measures rarely see their market share increase. Even when they do try to compare banks, it isn’t always easy, since the report notes a lack of transparency especially on issues such as overdraft charges.
Many of these findings will not come as a surprise to consumers or companies. It’s a “welcome if long overdue” investigation, says Richard Lloyd, executive director of consumer rights group ‘Which?’.
“While there have been encouraging signs of change from some banks, we need to see a revolution in customer service and much better, easily comparable products if more people are to be convinced that it’s worth switching accounts,” he adds.
“The CMA must now get to the bottom of why this market is not working for consumers, but the banks should not waste any time in making changes to put the interests of their customers first.”
Katja Hall, deputy director-general at the Confederation of British Industry, says that moves are already underway to improve competition in banking, such as simpler registration and seven-day switching. But the investigation would finally mark the chance to deal with the issue head on.