/ Money

Will a banking investigation prove crunch time for the banks?

The Competition and Markets Authority (CMA) is launching an investigation into the competitiveness of the personal current accounts market. So what’s the shake up about?

We’ve strongly supported the need for a full investigation into personal current accounts and have provided the CMA with evidence to show how retail banking is not working in the best interests of consumers leading to a lack of trust in the industry.

One of the strong indicators of poor competition is the historically low level of current account switching. The CMA used our customer satisfaction survey results to show that the banks which exhibit the highest levels of satisfaction ‘do not appear to be gaining significant market share – and, conversely, that those with relatively low levels of customer satisfaction have not significantly lost market share as a result.’ This is despite the introduction of the faster switching through the Current Account Switching Service more than 12 months ago.

We think that this is because people find it incredibly difficult to properly compare current accounts. The cost of each account very much depends on how you use it. And we know from our research that due to the confusing nature of overdraft pricing, people are unable to easily and accurately compare the costs based on their own personal use and may not be selecting the best account for their needs.

18-month banking investigation

The CMA will shortly appoint a group of independent members who will have 18 months to complete the investigation. During this time, we’ll be working to ensure that the CMA exposes the cost to consumers of a lack of competition in the market, and pave the way for reform.

To improve competition, we want the CMA to work with the other banking regulators (including the Financial Conduct Authority, and the new Payment Systems Regulator) to find ways to ensure banks improve customer service, and provide you with better quality products.

This includes making sure that new providers are able to drive innovation and competitive pressure. We also want current account comparison to be easier and clearer so better switching decisions can be made, as well as ways to help people control their overdraft usage. The CMA should also look at how ‘real consumers’ behave to understand what needs to be changed to make sure banking better serves its customers.

The end of ‘free’ banking

Lastly, some argue this investigation could result in the end of ‘free’ banking in the UK. We strongly disagree. Banking is not free for overdraft users and those with positive balances who potentially forgo interest that could have been earned in a savings account. The CMA’s analysis showed that banks earn £8.1 bn per year, or about £125 per personal current account. We believe that the introduction of an upfront fee would not necessarily result in greater transparency in charging, and might actually make it more difficult to compare accounts.

In the meantime, we’re also calling on banks to act now and seize the opportunity to put their customers’ interests at the heart of their business, whatever the outcome of this inquiry. They should aspire to meet consumer needs now and in future, innovate and improve service that exceeds expectations, and truly deliver a market that works for consumers. This will be crucial for trust to be rebuilt in banking.

brian braddon says:
17 November 2014

I have had a current account with the NatWest( formerly west minster bank) since 1956 and have been completely satisfied with the service!

Mike242golf@hotmail.co.uk says:
19 November 2014

Defo she a little fish I’m a big fish it won’t affect us


I think this opinion piece is strong on rhetoric but misses the very fundamental point that for the vast majority of people do not bother to change as not needed or not worth the effort.

Why is it not worth the effort? Because for the very obvious but universally unmentioned reaosn that Banks can change their offer the day before you move, the day after you move your account.

I call this the Velocity problem. The position of a service/product in the marketplace can change in a day. It may move from the best to middling with the chage of one component be it APR, size of free overdraft, change of credit interest paid.

Another words the simple consumer seems to have realised that chasing the “best” product is perhaps a waste of time.

IF banks were required to all set current account terms for a period of year[s] and all revealed them as coming into force three months ahead this would allow the consumer time to make a sensible choice.

Without controlling the velocity of tariff changes it is perhaps pointless to talk of best buys. However this very Velocity does of course provide plenty of work for journalists and comparison sites to generate hundred of inches of copy.

It is really not much help to customers.

penny says:
22 November 2014

The most important thing to me in this issue is that banks don’t change their offerings too much and that you get what you signed up for,and that stands for as long as you want that bank account. Online banking is a good thing but so are high street locations for when you need some face-to-face.


What does everyone think of what’s said here


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