As of today, the British Competition and Market Authority (CMA) is implementing a reform package to make retail banking more competitive and to exploit customer benefits from new technologies. These reforms are based on a final CMA report investigating the UK banking market. It finds established banks to be confronted with low competitive pressure regarding customers’ businesses while it is difficult for new banks to grow. As a result, consumers pay more than necessary and do not fully benefit from new services. To tackle this problem, the CMA proposes the following measures which require banks to:
- Adopt Open Banking by early 2018: This program will promote technological change in the British banking sector by enabling customers and small businesses to exchange personal data securely with other banks and third parties. Customers can manage their accounts and personal funds through a single digital “app” (i.e. to manage cash flow or avoid overdrafts) and compare products based on individual requirements.
- Implement service quality measures: Banks have to disclose trustworthy and objective information about their service quality on their website and have to publish a range of quality measures via Open Banking. This helps customers and small business to evaluate how their bank evolves.
- Send out "prompts": These may be periodic and event-based and contain customer information on the closure of a local branch or increases in charges. Since current accounts do not have annual renewal dates, this helps to remind customers to review whether they are getting the best value and to switch banks if not.
Alasdair Smith, Chair of the retail banking investigation, said: "The reforms we have announced today 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. Our central reform is the Open Banking program 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."
Source: UK Competition and Market Authority (CMA)