Banks in UK will be forced to inform clients about better deals
The UK competition regulator published the final results of its banking investigation.
The Competition and Market Authority said with only 3-4% of customers switching accounts per year, a huge number of personal customers with overdrafts are missing out an average 180 pounds of savings per year by switching provider, it was imposing a range of measures to force banks to inform customers of better deals and help them switch accounts to a rival.
With the big four banks, Barclays, HSBC, Lloyds and Royal Bank of Scotland controlling 77% of the current account market and more than 80% of small business accounts, it has long been felt that larger banks do not have to compete hard enough for customers' business, while smaller and newer banks find it difficult to grow.
As part of the new rules being imposed, the CMA said banks will be required to implement 'open banking' data sharing by early 2018 in order to enable all customers to more easily manage multiple accounts via apps or online, which it feels will help people avoid overdraft charges, manage cashflow and more easily compare products.
Banks will be forced to publish trustworthy and objective information on quality of service on their websites and in branches, so that customers can see how their own bank shapes up, and will also be requiring banks to send out text or email prompts when a local branch shuts or account charges are increased, to remind their customers to review whether they are getting the best value and switch banks if not.
The 1.2bn pounds a year that banks make from unarranged overdraft charges should be reduced with new remedies introduced, including alerts being sent to customers going into unarranged overdraft, and inform them of a grace period, to avoid charges.
Banks will also have to set a monthly cap on unarranged charges, and tell their customers about it.
To help small businesses get to the bottom of various bank charges, service quality and credit availability on offer, the CMA said it would throw its weight behind the independent charity Nesta in a new initiative that will require banks to provide Nesta with financial backing and technical support, alongside introducing a range of other measures targeted at small businesses such as a loan eligibility tool. ■