CMA update on the investigation in to the personal and small business banking sector
First published by Admin on February 20, 2017 in the following categories: Latest and tagged with cma
The Competition and Markets Authority has been investigating the supply of Personal Current Accounts (PCA) and banking services to small and medium sized enterprises on suspicion of anti-competitive behaviour.
The CMA conducted the investigation after complaints and concerns were made over the services retail banks provided. The main areas focused on were:
- Whether there is a weak customer response due to lack of engagement and/or barriers to searching and switching reducing the incentives on banks to compete on price and/or quality and/or to innovate;
- Whether there are barriers to entry and expansion constraining the ability of banks to enter or expand; and
- Whether the level of concentration is having an adverse effect on customers
When it comes to banking, much like energy and water suppliers, some customers tend to find one and then stick with them for years, or even for life. Some would say it’s just for ease, but if there isn’t much choice out there, is there any point changing?
The CMA was concerned that too many customers and companies were not aware of the broad range of banking services and providers out there. Since some of the main players in the banking industry are so big, and seemingly offer the best deals, there doesn’t seem to be much point in changing the status quo. However, this means that consumers may not be getting the best deal for the best price for them.
Investigation update
After their investigation into the industry, the CMA found there was indeed anti-competitive behaviour that was distorting and restricting competition. Certain banks were found to have breached section 134 (1) of the Enterprise Act of 2002 for creating barriers to the following:
- Access to information on changing services
- Switching personal current accounts
- Customer engagement
- New and smaller banks from entering the industry (especially by larger and well established banks).
Due to their findings, the CMA has issued a final report which included proposed remedies. These include requiring banks to provide more transparent information about the services they provide, as well as open information for prices, terms and conditions, customer eligibility for loans, to name a few.
The CMA are also seeking undertakings from banks to promise to increase customer awareness in terms of the switching process. The Authority was also aware that customers were not always fully aware of the financially adverse risks of their overdraft agreements. This problem was also addressed in the remedies.