Richard Lloyd, head of the consumer body Which?, didn’t need much time to come up with his reaction – after all, it’s the tenth competition investigation into the banking sector in 15 years.
So, on hearing that the big four banks have come through yet another inquiry, Lloyd made it clear that the Competition and Markets Authority has failed customers once again.
The British Chambers of Commerce, which represents small businesses, is also disappointed. “The CMA’s preliminary report pulls many of its punches – even if it acknowledges that some problems exist in the business banking market,” said John Longworth, the BCC director general.
In publishing 15 remedies intended to improve competition on the high street, the CMA has not used its toughest powers to demand a break-up of the incumbent players or impose new pricing measures on the market. Instead it wants the big banks to nudge their customers to move to rivals and make clear how much customers could save by doing so.
In reality, the CMA was never going to please everyone. If it had concluded that free banking – for customers who do not use overdrafts – needed to end, there would equally have been uproar. As the CMA said, requiring banks to charge for current accounts “would effectively be to set a price floor – not normally considered to be a means of increasing competition”.
The CMA’s own data shows the difficulty new entrants have had in taking market share from the big four: Lloyds Banking Group, Royal Bank of Scotland, HSBC and Barclays. Over the past 10 years, new entrants have sliced just a 5% market share, with the big four controlling three-quarters of current accounts.
Consumers now need to hold out for technological advances. The CMA points to the arrival of new digital banks – such as the branchless bank Atom – to compete for customers.
It also outlines hopes for the Midata project, the means by which customers can get tailored data about their own finances. Should it work, customers should be able to glean easier comparisons about the cost of banking across different providers. It will also cost the industry millions of pounds to create the system for an as-yet-undefined date in the future.
Then, perhaps, the industry will discover if customers can overcome their apathy and start to make the savings outlined by the CMA – £260 for heavy overdraft users – by switching their accounts.
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