A preliminary report has been published by the Competition and Markets Authority (CMA), following more than a year long investigation into the UK banking sector. It revealed current account customers could save an average of £70 yearly by switching their bank account to another provider. For people who have heavy overdrafts, there could be a saving of up to £260 a year.
The inquiry states not enough people are switching, despite the savings they could make, and the launch of the seven day current account switching service back in 2013. That initiative was targeted to encourage customers to switch, though only 3% of customers switched their current account in 2014. The CMA revealed 57% of banking customers have had the same bank account provider for more than 10 years, and 37% had the same provider for more than 20 years.
The reason for consumer reluctance to switch is found to be due to a general lack of faith in the banking sector being able to change services without there being any issues. Customers also fear that switching might be lengthy and complicated. The recent issues with mis-sold packaged bank accounts also may add to people’s hesitance to trust banks and the products and services they offer.
The ‘big five banks (HSBC, Barclays, Lloyds Banking Group, Santander and Royal Bank of Scotland) are highlighted in the report as providing more than 75% of all current accounts, with an even higher percentage for business accounts and loans.
The chairman of the retail banking investigation Alasdair Smith stated, “for too long banks have been able to sit back and take their existing customers for granted.” He continues: “We don’t think that customers will truly benefit from a more competitive marketplace until they can compare accounts more easily and feel confident that they can switch without risk, and that is why our provisional remedies are aimed at giving customers control.”
The CMA’s provisional remedies include the requirement for banks to prompt customers to switch at certain trigger points, such as if their bank closes or their overdraft changes. Banks are to fund the advertisement of the Current Account Switching Service (CASS), and they need to provide Midata for their customers (the service that shows transaction history and charges that have been paid). For small businesses, the CMA have recommended the creation of a price comparison website as well as measures to make it easier to borrow.
A final report is due from the CMA around April 2016.