New Retail Banking Recommendations

The CMA’s New Retail Banking Recommendations: Do They Go Far Enough?

After a wait of nearly two years, the CMA (Competition and Markets Authority) have released their final recommendations for changes to retail banking – which, it claims, will ‘shake up’ the sector and benefit small businesses. However, some parties are concerned that the changes don’t go far enough.

Breaking Down Banking Barriers

Alasdair Smith, who led the investigation carried out by the CMA, said: “These reforms will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks. We are breaking down the barriers which have made it too easy for established banks to hold on to their customers. Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.

“Our central reform is the Open Banking programme to harness the technological changes, which we have seen transform other markets. We want customers to be able to access new and innovative apps, which will tailor services, information and advice to their individual needs. This is backed up by a wide package of measures to improve the current account switching service, to make it easier for small businesses to shop around and open new accounts or get a loan, and to see how the quality of service provided by your bank compares with other providers.”

The Federation of Small Businesses (FSB) has long-campaigned for changes that would empower small businesses, making it easier for them to switch banks, get competitive deals, and has also expressed concerns over the high number of bank branch closures.

Mike Cherry, FSB National Chairman, said: “Today’s banking market does not work well for small businesses. The CMA’s recommendations will help to create a more customer focussed retail banking market by tackling some of the challenges small firms face.”

Further to Go, Says FSB

However, Mike Cherry also expressed the FSB’s concerns that more needs to be done to ensure a competitive banking marketplace for small businesses, and to protect those banks already affected by bank closures.

“We are pleased the CMA has taken forward our recommendations of greater communication and support to affected small business customers, but we now want Ministers to look at further options to protect small businesses’ access to their local bank,” he said.

He also welcomed the measures aimed at greater clarity on maximum overdraft charges, improving the Current Account Switching Service (CASS) and reassuring small businesses that switching accounts is quick and easy, but warned: “Current levels of switching among small firms are far too low, with only four per cent of FSB members switching in the last year. We look forward to continuing to work with all organisations to raise awareness of CASS across the small business community.”

The FSB has also welcomed the news that the CMA has also agreed with FSB recommendations to standardise the information and evidence needed to open a Business Current Account (BCA), and it is supporting the CMA’s proposals for online banking comparison tools – although it warns that safeguarding customer data must be an absolute priority. Andrew Tyrie, chairman of the Treasury Select Committee, also expressed concerns that retail banking customers may be “wary of the data-sharing required” in using technology to compare banks and accounts.

Suren Thiru, Head of Economics and Business Finance for the British Chambers of Commerce, also expressed concerns about data sharing and warned that the report “fails to address the structural problems in the provision of business finance, which are holding back some of our most dynamic young firms.”

TSB Chief Executive Paul Pester said the report was “disappointing” and “only the first rung in the ladder,” although he said this “should not constrain the Government in its ambition to achieve a truly competitive banking market.” Meanwhile, Gillian Guy of the Citizen’s Advice Bureau warned that SMEs must be made more aware of funding options outside their own bank, and that the CMA’s recommendations should be closely monitored to ensure they are effective. Stronger measures should be put in place, she said, if they don’t work.

However, Adam Tyler, Chief Executive of the National Association of Commercial Finance Brokers, called the recommendations “a giant step in the right direction.”

Stephanie Whalley
Serial snacker, compulsive cocktail sipper and full time wordsmith with a penchant for alliteration, all things marketing and pineapple on pizza.