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The CMA’s proposed changes to banking don’t go far enough

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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

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Useful links

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


Perhaps people don’t feel the need to switch, which is why many do not. Many previous contributors seem to have been happy with their bank.

“We could each be £70 a year better off”. Some might, by switching, but I don’t think the CMA said everyone would gain £70, did they?. It would not make sense.

“forcing banks to more proactively help customers who regularly use an unauthorised overdraft,” . You can easily ask your bank to arrange an overdraft. So why not arrange a legitimate overdraft? If they refuse it may well be because they do not consider you are suitable candidate. Taking money that the bank has not agreed to is then somewhat dishonest and you will pay penalties for doing so. The customer’s best bet would be to approach their bank and ask for help in sorting out their finances. I think Which? is wrong in giving customers the impression that regularly using unauthorised overdrafts is a right.

Tweaked the £70 sentence, thanks Malcolm.

Many people, especially the elderly, do not change bank accounts but as the banks withdraw A/Cs & set up new ones they frequently end up paying annual charges for “benefits” that are of no use to them.

I would suggest that banks should be morally required to ensure that all customers are on the best A/C for them especially the elderly who no longer feel able to deal with this & sadly often do have family who have the time to do so.

Banks are keen to offer incentives to attract new customers perhaps they should be offering rewards for customers who stick with them, some for 20+ years!

Not understanding the working of the Banks leaves me nervous to change the Bank for the last 55 years. Thye devil that you know would perhaps be no worse than the devil you do not know.

This conversation is about current accounts. I have two – one with one of the “big four” and one with a building society. Both are “free”. In all the years I have had them they have not been withdrawn or my terms changed in any way that affected me. I did choose to make a change from a “branch” account to an Online to get interest on positive balances, after a very helpful discussion with my branch but without any pressure. They pointed out that although I would generally deposit cheques and take out cash from the machine outside the branch, don’t worry- if it’s raining or the machine is in use, just come inside and we’ll deal with it for you.

I wonder how many really have problems with basic branch or online current accounts. I can recommend one to change to.

You have obviously been very lucky with your choice of banks. Not everyone is! Why do you think so many are applying for recompense for mis-selling, etc?

Maybe I have been lucky, or thought hard about offers I could refuse – I don’t know. However, as I say elsewhere, it is a mixed picture where some have problems, some don’t. But if only 3% change maybe the problems are generally not big enough.

Who do you say is a better bet.

The problem in switching is that it’s difficult to know which bank is currently offering the best combination of good service, good value, convenience and safety. Then when you do switch, your bank can change their terms and conditions and rates at will. Some banks incentivise you with bait such as a 4% interest rate, then you find that that rate only applies to the 1st £1,000 in your account and only lasts a year. So at best you can make £40 and that’s before tax. Hardly worth the hassle is it?

sandra Upton says:
23 October 2015

We switched from Nationwide to Santander when Nationwide withdrew the interest benefits after 12 months. Santander offers 3% on all balances up to £20K plus cash back on household bills and credit card purchases. After 14 months of using the Santander account we are very happy and receive more interest than on a savings account at a cost of £2.50 per month now £5 per month.

brian gale says:
23 October 2015

Santander seems the most reasonable I have so far come across.
However, my experience of other banks is very limited.

Even after tax, if you keep a good balance in this account you can do better than most savings accounts, bonds or ISAs!

I’ve been with Santander now for 15 months and I’m quite happy with the monthly interest I’m getting from my 1 2 3 Account.

Raymond H. I switched to Santander 123 A/c and have gained allround for £2 a month and the branch I use have been great so far and helpful… but it seems they are about to increase the monthly charge to £5 we shall see!!!!!

I’ve never changed my current account. I probably won’t ever want to, so long as it remains free.

I do move my savings around regularly though.

I had been with Lloyds for over 50 yrs and as I now live in Scotland was told my account was closing due to change in policy. I checked and saw advert on TV that Nationwide was the best bank and as I also had account with them I changed over completely from Lloyds. I don’t know where the £70 saving is though. J. Whyatt.

If everyone who might be able to make a saving of £70 by switching did so, how long would it be before the outflow was stemmed by reciprocal action by the losing and gaining banks?

I prefer to have an account with an organisation that makes money not gives it away, and charges people who take out money they don’t have in their account.

I am more interested in having accessible branches, efficient customer services in branch, on-line and by telephone, and reliability. I also wish to continue paying nothing to the bank for holding my funds securely, administering my cheques, issuing cash, and operating something over 140 direct debits and standing orders over the course of a year.

I suspect that very few customers would actually gain much by switching and some might lose if they took the headlines occasioned by this report at face value without making a detailed comparison. Perhaps a computer program could be made available whereby you could run a whole year’s transactions through it and see how the charges made or interest paid by other banks compared with yours.

Hi John,

Such a computer program does exist! The government launched a tool called Midata earlier this year.

More info at http://www.which.co.uk/money/bank-accounts/guides/switching-your-bank-account/what-is-midata/

Thanks Joe. They kept that quiet.

Like many reports that emanate from London, it fails to recognise that many people do not have a choice of bank if they want to use branch services. While it is possible to do many things on-line, from time to time it is necessary to pay in or draw out folding money or to speak to somebody about a personal situation. I have found this very useful when dealing with a death in the family and other circumstances. Other banks will act as agent for counter services but cannot provide a personal service for customers of other banks, for example if a credit has failed to materialise or a debit gone astray.

I wish I had a pound for every report that said I would be better off by switching this or that, or turning off the standby modes and looking for money in the crevices of the sofa.

My gripe is about my business account/s. Although the majority of my banking is done on-line, both incoming and outgoing money, the business still gets charged £25-£30 per month Bank Charges. The account is never in the ‘red’ and although I do still accept cheques these amount to no more than 6-8 per month.

If these charges were scrapped my business would be much better off – not by a lot but every penny today counts…

The base problem is that the banks are not competing with each other so there is little point in switching. If we had local banks who offered better deals than the big high street banks that would be a start, but how can we get these if the regulations are so restrictive that only big business can open a bank, even a small one. Surely we can find a way where by clients funds are insured or protected somehow?

Just because I can’t get online by 3,30pm each day to view my accounts, I get penalised by charges of £6 for each account if one of my 4 current accounts go overdrawn in any month. That’s the potential of £288 charges a year. What a rip off! I tried to discuss this with Lloyds who I’ve banked with since 1976 and they said there was nothing they could do to assist me. If you have a busy life the banks won’t help because the computer says ‘no’.

John says:
23 October 2015

I have been with Naat West ever since it became NatWest and they point blank refuse to give any loyalty bonuses or even a better interest rate.

There are at least three on-line Banks that have started up which will be more lucrative for customers. Not to mention Renault are also touting for deposits for their authorised Bank.

These new Banks have minimal infrastructure costs and staff and will be able to offer good rates but obviously no branches as such.

I also have no doubt that they will cherry-pick good trouble-free accounts so sorting out social ills and the problems of the elderly and the non-computer literate will not be their problem.

I would add the details of the new Banks but I will let Which? provide the details. I will download the .pdf [whatever Mbsize it is] and read at my leisure.

Simon says:
23 October 2015

This sort of article is why I stopped subscribing to Which? It is very easy to switch accounts, there is plenty of competition out there, and banks / utility companies are under no obligation to change the terms on accounts if their customers aren’t unhappy. As a consumer organisation Which? should focus on educating and informing consumers, not lobbying for government intervention.

An email from Which? tells me:
“The Competition and Markets Authority (CMA) officially confirmed the banking market isn’t working. Their proposed solutions focus on improving switching and giving people better information to compare accounts. We don’t think that’s enough. There need to be more radical changes.

Over a third of people have been with the same bank for more than 20 years. Which? thinks bigger changes are needed to increase competition and punish banks who fail to treat customers fairly.

Which? supporter Anthony told us –

‘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.'”

In this and previous conversations people have expressed their satisfaction with their current accounts. Other have not. So a mixed picture. But the only comment Which? chooses is one that slags off the banks.

Does Which? only select emotive comments that support the stance it has chosen to adopt? is balanced, fair and accurate not something an independent Consumers’ Association should keep in mind?

Santander put a decent current account on the market, then when they get customers on board they increase the standard fee to £5 with some excuse about savings rates falling in the market when they are making millions. Pure greed why can’t they be happy with a profit instead of making a killing.

Read what Martin’s Money says about it: if you keep a high balance in the Santander 123 account, you’ll still be quids in over most other current accounts.

Bank must open account if person got ID and proof of address.
Govt.shud instruct bank they cant refuse opening account

For me, one of the fundamental changes should that changing banks should not be held on your credit file. As the reference agencies flag it as a point of concern.

I switched from Smile (Coop) to Nationwide while the lurid stories about the Coop boss were current, more on a point of principle for that and because they reduced the credit limit on my visa card (which I hardly used in any case) for “responsible lending” reasons, when they were themselves in deep debt. “Physician, heal thyself” I told them. Nobody seemed to care about losing a customer who had been with Smile since it launched. Nobody cares about losing customers, period.

It’s a pity you didn’t investigate the reasons behind the Co-ops problems since, at the time, it was probably one of the the most ethical & moral banks in the UK. It’s unclear how Paul Flowers became Chairmain since he was a Methodist minister which led to poor Governance! The main problem with the Co-op Bank was the takeover of Brittania which was clearly instigated by the political establishment?? The “Due Diligence Report” was done by JP Morgan & somehow they seem to have “missed” the Black Hole declared later by the Co-op who were forced to take the blame! To remain independant from Government they needed more money quickly & given more time could probably have raised the money from members & other shareholder but opted for the Venture Capitalists which suited the rest of the Banking establishment. It’s actually a lot more complicated than this but all comes down to how much blame should the “Due
Diligence” Report accept? HP are still fighting a similarly disastrous takeover which went through despite an apparently negative due diligence report by KPMG.

If you’re concerned about reducing costs then there are many Web site that provide useful advice on the best account for you, as well as “Which”, but if you’re concerned about the moral & ethical standards within the banking sector you should visit “moveyourmoney.org.uk”!