Are the CMA’s provisional recommendations enough to increase competition in the banking sector?

The £8.7bn generated by UK current accounts comes predominantly from regressive hidden fees (Source: Getty)

Omar Ali, head of UK financial services at EY, says Yes

The CMA’s provisional remedies will encourage competition in a market that’s already much more competitive than it was. We now have several credible challenger banks, a burgeoning fintech sector and a switching service better than most markets.
But the CMA is right to recognise there’s still some way to go to increase consumers’ and SMEs’ awareness of their options.
Midata has real potential to bridge this awareness gap – using Open APIs to give consumers more convenient access to their data to promote choice, competition and innovation. It’s encouraging that the CMA supports it, and it needs to ensure cyber and data concerns are addressed.
Requiring banks to use trigger points to prompt their customers to review a relationship will further help raise awareness of options, and getting customer interactions right at these critical points will help banks deepen relationships.
By introducing trigger points and facilitating better comparisons of banks’ offerings, the CMA is addressing some of the major remaining barriers to switching.

Tom Blomfield, chief executive of Mondo, a new smartphone bank, says No

So-called “free banking” has long been criticised by consumer groups, and rightly so. The £8.7bn of annual revenue generated by UK current accounts comes predominantly from regressive hidden fees and charges.
Not only do these hidden fees make it hard to compare accounts, they are overwhelmingly borne by the poorest in society, subsidising “free banking” for the rest of us. It was disappointing the CMA did not tackle this.
Charges like £25 for each unauthorised overdraft transaction bite most acutely when people are short of money, having lost their jobs or as a result of illness. And when people are in financial difficulty, it’s usually not one charge, it’s a dozen.
Penalising people who are already in debt simply exacerbates the problem and causes the kind of downward spiral that resulted in 400,000 people seeking help from Citizens Advice last year.
The reason banks need to charge these fees is to prop up their legacy current account businesses. The thousands of branches and creaky old IT systems aren’t cheap to maintain.

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