The Competition and Markets Authority (CMA) has today unveiled its grand plan to improve competition in banking. But we think the proposals have fallen short of the mark.
Back in October, I wrote about the CMA’s recommendations for improving competition in banking. And it’s fair to say pretty much everyone, including many banks themselves (well the challenger banks at least), was left feeling underwhelmed.
But to the CMA’s credit, they did say they’d go away and take suggestions on board. Well today’s new, updated proposals show that sadly, not much has changed.
The problem is that the cost of using a current account depends on how you use it, but charging structures can be complicated, and pretty expensive if you slip into an unarranged overdraft. And despite banks rarely achieving decent satisfaction ratings, people don’t switch, leaving the big four banks with a dominant market share.
So if you throw in relatively low satisfaction, disillusioned customers thinking all banks are the same, and a small group of customers being charged through the roof, but not switching and not being helped to manage their situation, the diagnosis is not good.
Now there are some recommendations in the CMA’s report (PDF) that are undoubtedly good.
Recommendations like making banks regularly prompt their customers to check they’re getting good value from their provider, and making switching easier, are sensible housekeeping stuff that, in truth, banks should be doing anyway.
There’s also already been some good progress made on a new app to help people compare what bank is best for them, based on their actual account usage. Plus proposals requiring banks to alert people when they are about to go into their overdrafts, and giving them grace periods to avoid charges – these are certainly welcome steps in the right direction.
Fallen Short of the mark
But where the CMA has fallen short is what they’ve billed as a ‘cap’ on unarranged overdraft charges.
In reality, it’s not much of a cap. Banks are only being required to set their own maximum monthly charge and disclose this to their customers. It fails to mention that some banks already have a limit on the monthly cost of unarranged overdraft charges.
Also, while the CMA believes that transparency will help customers compare and encourage them to switch to a cheaper provider, it does so in the knowledge that heavy overdraft users are the least likely group to switch.
And if any of you are wondering about customer service in banking – well the CMA is proposing to require banks to display a small number of core indicators of service quality, like willingness to recommend the bank to a friend. There are also proposals to publish other quality measures to help people compare between providers.
But it’s not yet clear how this will work. What we’d like to see is some customer engagement, to test whether the information being presented is what people actually want to know.
While this is technically only the CMA’s provisional decision, after almost two years or investigating and rejecting calls for stronger action, it’s unlikely it will change its mind.
So it’s now over to the Financial Conduct Authority to implement the CMA’s remedies and judge whether they go far enough.
What do you think? Do you think that this a missed opportunity to improve banking?
Do you think banks that hit customers with unfair charges should be held to account?
Yes (99%, 4,903 Votes)
No (1%, 38 Votes)
Don't know (0%, 13 Votes)
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