The CMA has published a consultative working paper on prospective entrants as part of its Retail Banking Market Investigation. The paper, which focuses on the experience of five prospective new entrants, notes that whilst new entry into the retail banking market appears to be accelerating, there are a number of potential barriers which the prospective entrants have experienced. These include:

  • Customer inertia – in the view of the prospective entrants, this is the result of a lack of differentiation in the existing offerings, which results in apathy from customers.
  • Physical presence/branches – launching a branch network can be prohibitively expensive and none of the prospective entrants are planning to do so.
  • Capital holdings requirements – there was a mixed view on whether this represented a barrier to entry.

It was also noted that access to payment systems, licence application process and IT platform costs represented a lower barrier to entry than might be expected.

The working paper can be read in full here.