/ Money

Why competition in the current account market needs urgent attention

Bank card being cut with scissors

Today we call on the Competition and Markets Authority (CMA) to refer the current account market for a full competition inquiry. The unhealthy dominance of the biggest banks needs to end.

In September 2013, the industry-backed Payments Council launched the new personal current account switching service. At the time they hailed it as ‘the beginning of a new era for competition and consumer choice in the current account market’.

Six months on from these bold words and the new personal current account switching guarantee service has seen just 2% of people have switched accounts. And we’ve calculated that even if the numbers of people switching continues to grow at the same rate as recent Payments Council data suggests, only 4.2% of people will switch accounts this year.

Furthermore, the major six banks still having an unhealthy stranglehold on the market. There is little sign of new players entering the market and offering something genuinely different, and all the while consumer confidence in bank remains desperately low.

Full competition inquiry

That is why today we have called for the competition regulator – the Competition and Markets Authority – to take action now.

We’ve all had to endure the ‘wait and see’ attitude for long enough and little has changed. We want the CMA to take a hard look at the personal current account market and measure it against the following seven tests.

Seven Which? tests of a competitive banking market that works for consumers:

1. Are firms competing genuinely with better quality, innovative products or are they exploiting consumers’ behaviour?
2. Are consumers getting a choice of products which meet their needs and offer value for money?
3. Is there enough clear information about the product for consumers to compare easily?
4. Are there enough engaged consumers to drive competitive pressure?
5. Do consumers have everything they need to drive competitive pressure – are there barriers to switching?
6. Are consumers able to get quick and fair redress when things go wrong?
7. Are new firms which offer a better deal to consumers able to enter the market and compete on a level playing field?

If the market fails these tests, the CMA should refer the industry for a full competition investigation this year. Isn’t it time we all got a better deal from our current accounts?


“consumer confidence in bank remains desperately low.” I am perfectly happy with my current account with Nationwide – it does all I want with no problems. It costs me no money to run, provides online banking, branches, cheque book, statements, debit card – what better deal should I be expecting?
I do not know where “desperately low confidence” emanates from – perhaps we are blowing a problem out of proportion? I did note the complaints about the ways banks handled unauthorised overdrafts – I must say I have little sympathy with those who regularly use banks’ (your and my) money without agreement; not a main criterion by which I believe we should judge a bank.
Perhaps there is hard evidence about banks’ misbehaviour with current accounts that I have missed. Have we polled customer satisfaction as opposed to dis-satisfaction? If 98% of us have not moved accounts does this indicate gross apathy, or perhaps we are not too upset by the way our current accounts are run.
Just some thoughts before we let the beaurocrats loose..

“The unhealthy dominance of the biggest banks needs to end.” I personally would be happy if there was only 1 provider, provided it treated customers fairly instead of treating them like cash cows. And I can’t see having more poor choices will be any better than having a limited number of poor choices, its the choices that need to change not the number of them.

“Six months on from these bold words and the new personal current account switching guarantee service has seen just 2% of people have switched accounts” Well if like me many people have found a bank that they’re happy with, than like me , there’s no point in switching current account.
So a personal current account switching guarantee service is/was a waste of time.

Why not have an “ISA switching guarantee service ” instead of the laughable 15 day guaranteed one. Cos we all know banks will take 15 days and the main reason people switch is because the banks drop rates, if they didn’t do that many people would probably be happy to stick, so 15 days is about 10 too long.

I also believe that without adding 8. Banks must offer a fee free current account, all you’re likely to achieve by waving a big stick at the banks is a scenario where the poorest in society will end up paying more for their banking.

Neil says:
16 April 2014

Richard Lloyd needs to curb his use of both generalisations and emotive language:
“…and all the while consumer confidence in bank (sic) remains desperately low.”.
Talking as if the banking industry and it’s customers are homogeneous is simplistic. Some people, myself included are satisfied with their personal bank and the low switching rates may be in part a reflection of that.

I bank with the Nationwide but am not a passive banking customer. I am satisfied on the whole with their products and service, although I am never passive when things displease me. I have always found the Nationwide to be quick and constructive when responding to complaints, indeed I get the impression that they welcome feedback.

I usually find it’s productive to talk to my suppliers, resolve my problems and get improvements that work for both sides. I switched banks from Barclays some years ago when they became unhelpful but I prefer not to ‘solve’ problems by switching because switching, like war, should be a last resort.

I think switching levels, particularly when viewed on their own, may be a misleading indicator of the health of any consumer sector.

Gerard Phelan says:
17 April 2014

I have been a current account customer of RBS (and earlier in its Williams and Glyns incarnation) since 1976. I’d like them to give me more than 0.1% interest (it was 1% years ago), but their service just works. They made a rare mistake a few months ago by making an additional payment of my Council tax, but they sorted it out and explained how they got it wrong. The on-line system keeps improving and it is now possible to setup Standing Orders with different first payments (the lack of which led me to ask them to setup the Council tax Standing Order a year ago).

I am much more concerned with the Government’s demand that RBS forcibly transfer my account (and many others) to some upstart bank at the behest of “European officials” to offset the financial support of 2008. So much for individual choice! If this ever actually looks like happening then I am still pondering moving my account to a Scottish branch of RBS to avoid being hijacked in this unfair manner.

So where have Which? got such overwhelming evidence from to state “That is why today we have called for the competition regulator – the Competition and Markets Authority – to take action now”. Has a representative poll of CA Members revealed a disastrous situation?

Test no 7:
The cost, regulation and probable lack of profit for a pure banking service are the main barriers to new entrants.

I am disappointed that most banks will pay little or no interest on current accounts yet will charge a fortune if a customer makes even a single small mistake and goes into the red. I have always been careful about managing my current account but one day the inevitable happen and I found I had an unarranged overdraft and substantial interest charges. That was when I was before I used online banking and was reliant on statements. The bank had not informed me when I went into the red and the interest charges were refunded when I pointed out that I was in debt because of the banks error. After banking with the same bank for many years and always maintained a healthy balance, I would have thought I could have been allowed one transgression if the mistake had been mine, or they could have transferred money from another account that I held with them at the time.

I am not aware that my bank is very different to most others. I feel that if banks are waiting to make charges for any small error made by a customer, they should also declare rates of compensation for when the mistake is theirs.

I would like to see banks agree to a code of fair practice for current account customers.

Banks in my experience have paid me when they made an error, and other conversations refer to such coimpensation. If you want interest on your current account then you must expect to pay for the cost of running the account – it costs the bank money to do this for you. As far as going into the red is concerned, I have an agreed overdraft with my bank – not used by me normally, but there just in case I go below zero by mistake.

What I expect is banks to pay compensation automatically or to recognise that either side can make an occasional mistake. I have an agreed overdraft with my bank, though it has not been used. I was referring to an amount of unexpected debt above this limit.

Banks need to consider their customers first and their shareholders second, but that is no different from other companies dealing with the public. I support the action being taken by Which? It would be good if all banks offered the option to pay for current account services and offer a rate of interest was not to dissimilar to the rate they charge good risk customers that go into the red. I appreciate that interest rates need to be higher for those who have a poor financial record.