The FSB believes that actively promoting the Business Bank Insight comparison website on the quality of bank products will support transparency across the banking sector. Difficulties accessing finance and banking services ranks at the top of the Federation of Small Business (FSB) members most pressing problems.
This issue has been highly debated since the start of the financial crash, as many FSB members struggle to get the finance they need from a market that is dominated by a few very large banks. With this in mind, the FSB has welcomed the Competition and Market Authority’s (CMA) decision to launch a market investigation of the small business banking sector which should increase competition.
Nearly 5 years ago competitions expert Donald Cruickshank criticised retail banks for overcharging small business customers for banking services and the structural issues that hamper competition. However, since Cruickshank’s report, the leading few banks still dominate the market for small business accounts. This suggests that choice has remained limited.
In conjunction with this there continues to be a range of barriers to entry. These barriers either potentially deter new entrants from joining the market or block their growth. This means that small firms have not seen the full benefits of reduced costs, increased choice and better access to finance had these structural issues not been in place.
The FSB therefore wants this investigation to focus in on the ways in which barriers to entry for new banks could be reduced – this includes alternative finance providers. The goal is to deliver a market structure that encourages dynamism, choice and innovation.
The FSB believes that actively promoting the Business Bank Insight comparison website on the quality of bank products will support transparency across the banking sector. This should then encourage the major high street banks to up their game for the small business customer.
There has been progress so far to tackle these structural issues, however the FSB believes the progress has been limited and slow.