Bank customers in UK to save £1bn after new rules
This is one among several measures proposed by the competition watchdog to improve competition in retail banking.
Concluding its investigation in the sector, the Competition and Markets Authority (CMA) said its proposed changes could lead to £1bn of benefits to customers over five years, with personal customers on overdrafts saving an average of £153 a year.
Rejecting the idea that the big banks should be broken up, the CMA said it would "not address the fundamental competition problems" as an increased numbers of banks would still mean customers could not easily choose between them due to a lack of transparency on fees and charges.
As a result, proposed measures from the CMA include forcing banks to set a monthly maximum charge for unarranged overdrafts on personal current accounts, as around £1.2bn of banks' revenues came from unarranged overdraft charges in 2014 for example and many customers are not aware of when they go into unarranged overdraft or realise the costs they are incurring.
To make switching easier, the CMA proposed requiring banks to swiftly introduce an open API (application programming interface) banking standard that will enable personal and SME customers to safely and securely share their unique transaction history with other banks and trusted third parties.
The CMA also proposed that banks should be made to regularly prompt their own customers to check they are getting good value from their banking provider and direct customers to price comparison websites that give tailored advice.
At present the CMA calculated that personal customers switching to a cheaper product could reap an average annual saving of £116; ranging from £89 on average for customers who do not use an overdraft, to £153 on average for overdraft users. ■