The Competition and Markets Authority recently recommended a competition inquiry into the banks. In this guest post, the CMA’s Alex Chisholm asks whether you think the industry should face a full inquiry.
Last week we announced the findings of two major studies into retail banking, both of which gave us cause for concern. We found that in two key areas – personal current accounts and small and medium size business (SMEs) banking – the market doesn’t appear to be working well and that the banks are not meeting the needs of their customers.
The banking sector is of critical importance to the UK economy. It affects virtually every household and small business in the country, with over 65m active personal current accounts holders and SMEs employing nearly 60% of the UK private sector workforce.
Retail banking concerns
Yet, despite a number of recent initiatives to make banking easier and faster, our studies have still identified a number of concerns, including:
• Low satisfaction levels. We found that consumers are less satisfied with the ‘big four’ banks than they are with the smaller providers. Indeed, recent research from Which? showed that satisfaction levels with the ‘big four’ was less than 60%.
• Yet despite this lower satisfaction, people aren’t shopping around and switching. The new seven-day switching service was launched in September last year making it easier and faster to switch, but only around 3% of personalcurrent account customers switched in the last year – even though this could result in significant savings for users of overdrafts.
• People find it difficult to compare products and services offered by banks, particularly overdraft charges which are very complex. This makes it hard to choose the cheapest or most appropriate account. This is significant when 25m of us have overdrafts, of which we estimate 2m consumers pay over £400pa in costs
• Challenging the ‘big four’: Banks still find they need an extensive branch network to be seen as a ‘proper bank’ for most customers, despite the undoubted growth in mobile/online banking.
As a result of all this and more, the retail market has remained largely static, with the ‘big four’ accounting for over 77% of the personal current account market.
Competition in the banking industry
We‘re now consulting on our provisional decision to launch an in-depth market investigation. Any such investigation would be carried out by an independent group of CMA panel members who would have order-making powers to remedy adverse effects on competition identified. We believe this would help to ensure that both you and SME businesses will benefit fully from really effective competition between banks.
Do you think the banking industry should face a full competition inquiry? If so, why? Submit responses to our consultation at firstname.lastname@example.org before it closes on 17 September, and share your views below.
Which? Conversation provides guest spots to external contributors. This is from Alex Chisholm, chief executive of the new Competition and Markets Authority. All opinions expressed here are his own, not necessarily those of Which?.