The Competition and Markets Authority (CMA) has made a number of suggestions to improve the current account market. But they don’t go far enough.
Today we got a chance to see what the CMA has been working on in its 18 month investigation of the current account market. It’s confirmed what we’ve been saying for some time – competition in the banking market just isn’t working.
A lack of competition
The big four banks – Lloyds, Royal Bank of Scotland, HSBC and Barclays – control more than three quarters of Britain’s personal current accounts. And that’s not likely to change any time soon, since only 3% of customers switched in 2014.
More than a third of customers have been with the same bank for more than 20 years. Indeed, it’s quite telling that you’re more likely to break up with your partner than with your bank. No wonder the big banks are failing to compete for our business.
Our campaign supporter Anthony has harsh words for the banks:
‘Banks are making money out of people who don’t switch or check their accounts regularly. Often these people will be elderly or vulnerable. Most banks do not reward customer loyalty, act amorally and treat savers with contempt.’
Making it easier to switch
The CMA makes it very clear that competition isn’t working and that we need to be encouraged to switch from accounts that aren’t right for us. And breaking up with your bank could be good for your pocket, with the CMA suggesting that you could be £70 a year better off. That rises to £260 a year if someone’s regularly dipping into their overdraft.
So what does the CMA propose should change? Their suggestions include:
- Banks prompting customers to switch at certain trigger points, such as after branch closures or when overdraft charges change
- Making it easier for us to switch by allowing customers to see their transaction history to help us compare banks
- Funding a ‘sustained’ advertising campaign for the Current Account Switching Service to help raise public confidence in switching
We need more radical action
But will these changes actually change banks’ behaviour? We don’t think so, and we’d like to see more radical action. The CMA’s own evidence shows that people are disengaged from the banking market, so better information and nudges to switch simply won’t be enough.
We need to see creative solutions that’ll spur the banks into genuinely competing with one another. So we want the CMA to:
- Look at forcing banks to more proactively help customers who regularly use an unauthorised overdraft, as well as increasing compensation for customers who suffer poor service
- Regularly name and shame the worst providers for bad behaviour
- Consider how banks can put people in control of their overdrafts, for example by notifying customers before they go into the red
The regulator now has six months to find more radical ways to promote switching, improve information for customers and punish banks who fail to treat their customers fairly.
Do the CMA’s proposed changes to the bank current account market go far enough?
No (72%, 1,082 Votes)
Don’t know (23%, 340 Votes)
Yes (6%, 86 Votes)
Total Voters: 1,508

Useful links
Read the CMA’s retail banking market investigation – summary of provisional findings report (PDF)