The Competition and Markets Authority (CMA) will launch an investigation into personal current accounts.
The move is a reaction to the dominance of the ‘big four’ banks in the current account market – Lloyds, HSBC, Barclays and RBS.
Commenting on the announcement David Mann, Head of Money at uSwitch, said: “This is an important first step towards fixing the many ailments of Britain’s broken banking sector.
“The iron grip held on the current account market by the big four banks has bred a culture of complacency. Consumers can see virtually no difference between the services offered by different banks and, as a result, dissatisfaction levels are running high.
“We will only know that competition is working effectively when banks start putting customers at the heart of their business strategy, and deliver a world class service. The quicker reform happens, the better.”
What will the investigation focus on?
At present the ‘big four’ banks control approximately 77% of the personal current account market, and 85% of the small business banking market, according to the CMA.
This has lead to concerns from the CMA about:
- low levels of customers shopping around and switching;
- limited transparency, and difficulties for customers in making comparisons between banks, particularly for complex overdraft charges on personal current accounts;
- continuing barriers to entry and expansion into the sector, limiting the ability of smaller and newer providers to develop their businesses;
- very little movement over time in the market shares of the 4 largest banks, which provide over three-quarters of personal and business current accounts.
The CMA will launch a ‘full investigation’ into the industry to see how competition in the sector can be encouraged.
Better service for individuals and small businesses
Commenting on the announcement Alex Chisholm, CMA chief executive, said:
“Effective competition in retail banking is critically important for individual bank customers, small and medium-sized businesses, and the wider economy.
“The Market Reference Group will investigate in detail and decide what action, if any, may be needed to improve competition for the benefit of personal and small business customers.”
Want to switch bank account?
Current account switching service – This has made it simpler to switch to a new account. Switching your account should take no more than seven days and all your Direct Debits should be automatically transferred to your new account.
Compare current accounts – See if you could get a better rate for your savings or a bigger cheaper overdraft.