The Competition and Market Authority (CMA) is investigating the supply of personal current accounts and banking services to SMEs. As part of this ongoing investigation, the CMA has published summaries of response hearings, held throughout December, following the release of the Provisional Findings Report.
The Provisional Findings Report confirmed that the CMA believed that banks must address long-term problems, and make it easier for customers to take charge of (and therefore be better able to switch to another provider) their accounts. The CMA found that banks do not have to work to compete for customers, and low levels of customer switching does not add competitive pressure. To resolve these issues, the CMA’s proposed remedies include:
- Requiring banks to prompt customers to review the service they receive at certain “trigger points”.
- Upgrading Midata (software that stores a customer’s transaction history) to make it easier for consumers and businesses to compare bank products using price comparison websites.
- Requiring creation of a new price comparison website specifically for SME banking services.
- Requiring banks to help raise public awareness of, and confidence in, switching bank accounts.
During the response hearings, concerns with the proposed remedies were raised, including:
- Insufficient evidence in the CMA’s conclusion of a lack of competitive pressure in the sector, and other analytics used in the Provisional Findings Report.
- Consumer scepticism concerning banks providing recommendations for alternative banks at “trigger points” and consumers’ security concerns if these recommendations originate from a third party other than a trusted advisor, such as an accountant or independent financial advisor.
- How these remedies could be scaled, as they may place a disproportionate strain on challenger banks.
Most banks were supportive of the CMA’s plan to upgrade Midata with a view to making ti easier for SMEs to compare the banking services they receive. It was suggested that other indicators should be built into any comparison model e.g. additional services, such as customer-chosen non-price measures. Additionally, the point was made that other public bodies, such as HMRC and Companies House, could do more to encourage SMEs to consider their banking arrangements.