{"id":63123,"date":"2015-10-22T06:00:17","date_gmt":"2015-10-22T06:00:17","guid":{"rendered":"http:\/\/mostafa.openonline.co.uk\/?guid=ab9bc8af77033227923a666adf243149"},"modified":"2015-10-22T06:00:17","modified_gmt":"2015-10-22T06:00:17","slug":"press-release-cma-proposes-better-deal-for-bank-customers","status":"publish","type":"post","link":"https:\/\/mostafa.openonline.co.uk\/?p=63123","title":{"rendered":"Press release: CMA proposes better deal for bank customers"},"content":{"rendered":"
\n

Publishing its
\n provisional findings <\/a>
\n (PDF<\/abbr><\/span>, 696KB<\/span>, 36 pages<\/span>)
\n<\/span> as part of an in-depth investigation into the \u00a316 billion current account and business banking sectors, the Competition and Markets Authority (CMA<\/abbr>) has found that banks do not have to work hard enough to compete for customers.<\/p>\n

The investigation has identified a number of competition problems in both the personal current account (PCA<\/abbr>) and small and medium-sized enterprise (SME<\/abbr>) banking markets. Low levels of customer switching mean that banks are not put under enough competitive pressure, and new products and new banks do not attract customers quickly enough. There is a particular problem in SME<\/abbr> banking where many SMEs open their business current accounts (BCA<\/abbr>) at the same bank where they have their PCA<\/abbr>, then stick with that bank for their business loans.<\/p>\n

57% of consumers have been with their PCA<\/abbr> provider for more than 10 years, and 37% for more than 20 years. Customers with current accounts are faced with complex overdraft charges and limited information on product and service quality, which, along with limited effective comparison tools, makes it very difficult for customers to know what they are paying and to compare banks and products. <\/p>\n

Bank customers fear that switching their current account to a new bank will be complicated, time-consuming and risky. The Current Account Switch Service (CASS<\/abbr>) was set up to make the process easier and is functioning reasonably well, but awareness and confidence remain low. Only 3% of customers switched their PCA<\/abbr> in 2014 and just 16% looked at alternative accounts. <\/p>\n

The CMA<\/abbr> found that overdraft users are even less likely to switch PCAs than other users. Heavy overdraft users, in particular, could save up to \u00a3260 a year if they switched. On average, current account users could save \u00a370 a year by switching.<\/p>\n

The investigation also discovered that accounts which are more expensive and below average quality are not losing customers to cheaper and better alternatives at the rate that would be expected in a well-functioning market.<\/p>\n

The lack of competitive pressure in SME<\/abbr> banking is highlighted by the fact that more than 50% of start-ups looking for a SME<\/abbr> account choose the bank with which they have a personal current account, over 90% stay with their BCA<\/abbr> when the initial free banking period comes to an end, and around 90% then go to their BCA<\/abbr> provider when they are looking for business loans.<\/p>\n

As in the case of PCAs, the opening and\/or switching process is seen to be time-consuming, and at risk of things going wrong. SME<\/abbr> charging structures are complex and difficult to compare, there are no service quality measures to aid comparison and there are limited effective price comparison tools for SMEs.<\/p>\n

The CMA<\/abbr> investigation did find a number of positive developments: new entrants into both PCA<\/abbr> and SME<\/abbr> banking, innovative products becoming available, the digital innovations associated with online and mobile banking, and new tools like Midata and CASS<\/abbr>, which have the potential to increase searching and switching.<\/p>\n

Despite these encouraging developments, because too few customers are switching, banks do not have strong enough incentives to work hard to compete for customers through better products or cheaper prices, and smaller or better banks find it hard to gain a foothold.<\/p>\n

The CMA<\/abbr> has published an
\n initial list of remedies<\/a>
\n (PDF<\/abbr><\/span>, 902KB<\/span>, 47 pages<\/span>)
\n<\/span>, which sets out possible measures aimed at addressing these issues by increasing competition and securing a better deal for customers. It will develop these proposals over the coming months. It is important that any new remedies are really effective, so the CMA<\/abbr> will be testing its proposals carefully. <\/p>\n

Potential remedies include: <\/p>\n