After a near two-year-long probe into the banking sector, the Competition and Markets Authority has today published its proposals to shake up banking. But will it be enough?
The Competition and Markets Authority (CMA) has today recognised that the ‘big four’ banks – Lloyds Banking Group, HSBC, Barclays and Royal Bank of Scotland – dominate the market, and consumers aren’t switching. In summary, the banking sector isn’t working for all consumers, and a shake-up is long overdue. So what’s the CMA’s fix for this?
CMA banking remedies
Broadly speaking, today’s proposals includes some welcome news for the more than 50,000 supporters who’ve backed our Better Banks campaign.
In a win for our campaign, the CMA has laid out plans to ensure banks do more to help people manage their money. We called on the CMA to introduce alerts for overdraft usage and grace periods to help people avoid charges – and the CMA has done just that.
A revolution in mobile banking to promote better and easier switching is the big news from the CMA’s proposals.
The new ‘open banking’ standard will aim to deliver the same services on smartphones as those found in high street branches. Applying for loans, overdrafts and mortgages should all be available via mobile phone, as well as being able to transfer money between accounts.
The aim of this proposal is to pave the way for new services that are better tailored to individual needs – for example, using a mobile phone app to manage accounts held with different providers and compare better deals based on banking usage.
You should be able to access the details of your entire finances through a mobile phone app by 2018. The CMA believes this will encourage more people to switch to better deals, but concerns have been expressed today about potential security issues.
Unarranged overdraft charges
Missing from today’s remedies were strong plans to directly tackle high unarranged overdraft charges.
While the CMA will require banks to set a limit on their charges, the proposal will allow banks to set this limit themselves. It will allow banks to continue to impose charges that can cost as much as a payday loan.
These charges remain problematic for consumers. Last month, we asked you here on Which? Conversation ‘Do you know how much your overdraft fees are?’ The majority told us they didn’t – 45% said ‘No, I have no idea what the cost would be’ and 20% said they weren’t sure. Only 36% said they knew exactly what the charge would be.
As Kim Marie explained to us here on Convo:
‘It’s not always avoidable – my council decided (incorrectly) that we’d been overpaid council tax benefit, they debited the amount they wanted back immediately, sending us overdrawn. It took me weeks to get the money back from them and a refund for my bank charges and compensation. I cancelled my direct debit for them and they now get paid late every month to teach them a lesson!’
Without stronger measures to control unarranged overdraft charges, they could remain at crippling high rates affecting some of the most vulnerable consumers. We want to see the financial regulator to review overdraft charges and crackdown on these punitive fees.
Today’s proposals are welcome news, particularly with the steps outlined that aim to give customers better information and an improved switching experience.
However, we maintain that more will need to be done not only to increase competition but also to ensure banks deliver a better service for all customers.
We expect the Financial Conduct Authority to press ahead and implement these changes to help deliver better banking for consumers.
So tell us, what do you think of today’s proposals to shake up the banking sector? Do you think these will be enough?