The Competition & Markets Authority (CMA) recently released a provisional report outlining proposals to reform retail banking in the UK, improve competition and get a better deal for customers. In my opinion the CMA report just doesn’t go far enough to push the banking industry into the radical reform that is so desperately needed.
Changing bank accounts to save money sounds great in principle – we all like to get a good deal – but the reality is quite different despite the government ploughing millions into making it easier for us to switch. In fact there are around 60 million active accounts in the UK but only 1% have switched so far. Overlay this with the fact that the Big Four dominate market share, with HSBC, Lloyds, RBS and Barclays providing 70% of personal current accounts in the UK and 8 out of 10 business loans and it makes grim reading for the new challenger banks. However, these newcomers are much more focused on what customers want and are designing their products and services around their needs – which is more than I can say for my bank, one of the Big Four.
Currently it’s down to the individual to ensure that they have the right bank accounts or switch if they find a better offer. It’s quite a lot of effort to determine whether it’s worth changing to another bank – customers just can’t work out whether they are getting good value. And bank charges are typically complicated leaving most customers confused. With little switching taking place, competitive pressures are weak so the big banks just don’t need to work very hard on price or quality of service.
The CMA report believes that the banks need to provide their customers with the right information so that they can easily find out which provider and type of account offers them the best value. This should be a simple thing for the bank to do, after all they know our daily spending habits probably better than our spouses!
The CMA also propose to push through the development of a new online comparison tool(s) to make the CASS (current account switch service) easier, more straightforward and ultimately give consumers more confidence in the end-to-end process. Other tactics include regular prompts from the banking provider allowing the customer to check they are still on the best deal and directing them to digital comparison services. These would offer tailored bank account comparisons that suit their individual needs and circumstances, allowing them to find a better deal.
Open APIs enabling people to share their banking transaction history with other banks and trusted third parties securely could also be positive and help massively.
There is no doubt that technology will enable banks to offer better bespoke services and products to customers but there has to be a willingness on their part to move forward. The Big Four are rife with legacy issues, from customer databases to outdated systems, and they tend to be slow to change, whereas the new challenger banks are agile and ‘get’ the customer. The CMA don’t want to break up the Big Four so they must put pressure on them to be more transparent – which is probably the nudge that many people will need to switch accounts and give a challenger bank a go.
I for one can’t wait for Atom to launch and am actively following many of the other new start-ups. I’d much rather give my business to one of them, as I want to be treated as an individual – by an organisation that understands my needs