The Competition and Markets Authority (CMA) report, published this morning, called on banks to implement an “open banking” standard by 2018, allowing customers to monitor and access all of their finances through a single smartphone app, even if they are managed by different providers.
The watchdog hopes that by putting all of consumers' financial products in a single place, and improving the ability to compare, it will be able to encourage better competition.
The proposals go beyond suggestions the CMA published in May. However, the consumer watchdog decided against introducing limits on overdraft charges, sticking to its focus on making accounts more comparable.
TSB: Thumbs down
TSB chief executive Paul Pester said the report fails to pursue more fundamental reform, including forcing banks to display the costs associated with free-when-in-credit accounts.
“Banking must be the only industry that doesn’t tell its customers how much they are paying for their services.
“Consumers need to be equipped with the necessary tools in order to make informed choices about the best products and services for their needs. This is why we will continue to champion transparency over the true cost of banking through the creation of a monthly bill,” Pester said.
“The CMA’s report is only the first rung on the ladder and, while disappointing, it should not constrain the Government in its ambition to achieve a truly competitive banking market.”
Tesco Bank chief executive Benny Higgins agreed: “Customers have a right to know what they are paying for their bank account and what they receive in return."
Metro Bank chief executive Craig Donaldson said he was "astonished" by the failure to look at capital requirements for challengers, and accused the CMA of "tinkering around the edges" of reform.
"Disproportionate capital requirements are anti-competitive and unduly support the large incumbent banks by allowing them to hold up to 10 times less capital for the same loans than challenger banks," he said.
Phillip Monks, chief executive of Aldermore, was also less than impressed with the final report.
"Two years in the making, and following numerous other reports into banking competition, I’m left with the feeling that the CMA has missed a huge opportunity to provide a real, positive economic impact," said Monks.
Atom Bank chief executive Mark Mullen has warned the proposals still give the big banks too much responsibility for the future of the industry.
"It’s like trusting a pyromaniac with the security for a fireworks party," Mullen said.
"The cultures and behaviours of many of our biggest banks and financial services providers contributed directly to the financial crisis and to the destruction of trust in our banking system and so to allow them to be in control of future standards is beyond absurd."
Hampshire Trust Bank
Mark Sismey-Durrant, chief executive at Hampshire Trust Bank, was another who thought the CMA had failed to take advantage of a vital opportunity. "We understand the CMA does not have powers to alter the capital funding requirements, but the report could have been a good platform to bring this issue, which impacts challenger and specialist banks, to the fore," said Sismey-Durrant.
Rishi Khosla, co-founder and chief executive of OakNorth Bank, also slammed the report for having "fallen short."
"The CMA should work with the Treasury and the regulators (PRA and FCA) to create a more favourable regulatory environment for new entrants such as OakNorth," said Khosla. "Unlike large banks, we do not pose a systemic risk so should not have to adhere to the same capital and regulatory requirements as them."
Ricky Knox, founder and deputy chief executive of Tandem, welcomed the report's focus on embracing technology.
"Too often banking can feel like a one way conversation, and plays to the favour of an institution," said Knox. "Advances in technology will make for a balanced conversation, where banks will be able to truly understand and help their customers."
Sophie Guibaud, vice president of European expansion at Fidor Bank, was more optimistic about the report.
"Consumers have been suffering for far too long from complicated current account prices," said Guibaud. "It's now time for the banks to make their prices clearer for everyone, while putting in place measures to help customers choose the best current account and service for them."
What about the government?
Newly-installed City minister Simon Kirby praised the CMA's work.
“I hope this report will further help to drive more competition in banking and ensure customers, overdraft users and small businesses get a better deal,” Kirby said.
“The government will carefully consider the recommendations over the next few months and stands ready to take the necessary action to ensure our banking sector remains competitive and delivers for customers.”