Daily Times

Critics of the UK’s competition watchdog lambasted it for “missing a golden opportunity” with its two-year investigation into high-street banking and its recommendations to shake up the sector. The Competition and Markets Authority revealed on Tuesday its final measures aimed at injecting competition into the £16bn personal current account and small banking market.

After a delayed process that cost about £5m, the watchdog has decided it will order banks to adopt new digital services to spur a banking “revolution”. It will also allow them to impose their own limits on unarranged overdraft fees and make them launch other services designed to help people shop around for better current account deals.

The investigation follows concern that customers have limited choice in a sector dominated by the largest banks: HSBC, Barclays, Royal Bank of Scotland and Lloyds Banking Group. Only 3 per cent of personal current account customers moved banks in the past year.

However, industry bodies and new “challenger” banks have heaped criticism upon the watchdog’s measures, saying they will not stoke competition in the market nor provide sufficient help to the poorest customers.

Mark Mullen, chief executive of new digital bank Atom, said: “We have seen an incredible level of inertia in banking – people would rather go to the dentist than give attention to changing bank accounts. Do they [the CMA] really think this is going to solve inequities in how banks treat customers?”

The CMA “chickened out on BT and Openreach”, added Mr Mullen, “but at least went some way on gas pricing and setting maximum tariffs for the least well-off customers”.

Andrew Tyrie, who chairs the Commons Treasury Committee, said: “Until people are able to find out how much their bank charges them for their current account, millions of customers will be denied genuine choice in retail banking. There is a lot to digest [in the report] but, based on what I have seen so far, I am not optimistic that the CMA’s remedies will get to the heart of the problem.”

One of the CMA’s key measures is to make high-street banks adopt a digital standard called “open banking” by 2018. This will allow customers, if they agree, to have their transaction history shared with other banks and third parties. Customers can then click on an app to gain current account comparisons tailored to their individual needs, directing them to the bank that offers them the best deal.

The information-sharing technology, used by companies such as Uber and Facebook, will allow customers to see information about product prices, services and branch location.

However, Mr Mullen said open banking “predates the investigation” and in fact came from European regulation called the Payment Services Directive, which the CMA had “latched on to”.

There are also security concerns over sharing customer data. Anthony Browne, head of the British Bankers’ Association, told BBC Radio 4: “You cannot force people to give out their personal data you need to make it absolutely clear if it does go to a third party that it is securely protected.”

The CMA said: “When it comes to customer data, privacy and security concerns are paramount. Only when customers are satisfied that the right safeguards are in place and give consent will their data be shared with anybody.”

The move to allow banks to set their own monthly limit on unarranged overdraft fees rather than impose an industry-wide cap – a move intended to make banks clarify and publish fees – also came under fire. “Giving banks the freedom to set their own maximum overdraft charges seems counter-productive”, said Hannah Maundrell of consumer site money.co.uk.

The main issue, Ms Maundrell added, was that customers “simply do not see the benefit in switching”. Furthermore, people were treating overdrafts as “an easy way to borrow a bit more rather than an expensive crutch that could turn into a dangerous habit”. UK banks are charging consumers more than 12 times the cost of a payday loan for an unarranged overdraft, according to research by Which?, the consumer group.

The CMA, which has the power to break up companies under the Enterprise Act of 2002, considered a range of options such as splitting up the banks and ending free banking. It decided that carving up the large high-street lenders would be a “very expensive and lengthy process” and would be “highly disruptive to those customers affected”. It also opted against ending free banking in case the overall cost of having an account rose.

Chief executives of challenger banks believe the watchdog should have pursued other means to boost competition. Paul Pester, chief executive of TSB, said: “The CMA has played right into the hands of the big five banks and missed a golden opportunity to enable people across the UK to get a better deal from their banks.”