UK watchdog pushes for open banking revolution
The UK’s Competition and Markets Authority (CMA) has unveiled its plans to make banks “work harder for customers” and ensure the “benefits of new technology are fully exploited”.
The CMA’s final report on its retail banking market investigation concludes that “older and larger banks do not have to compete hard enough for customers’ business, and smaller and newer banks find it difficult to grow”.
Alasdair Smith, chair of the retail banking investigation, CMA, says: “We are breaking down the barriers which have made it too easy for established banks to hold on to their customers. Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.”
To tackle the issues, the CMA has set out a package of reforms.
It wants banks to implement Open Banking by early 2018, to speed up technological change in the UK retail banking sector. It says Open Banking will enable personal customers and small businesses to share their data securely with other banks and with third parties, enabling them to manage their accounts with multiple providers through a single app.
It requires banks to “publish trustworthy and objective information on quality of service on their websites and in branches, so that customers can see how their own bank shapes up”.
It also wants banks to “send out suitable periodic and event-based ‘prompts’ such as on the closure of a local branch or an increase in charges, to remind their customers to review whether they are getting the best value and switch banks if not”.
The CMA is also introducing measures to make it “easier” for customers in the UK to search and switch to a different bank; smooth out unarranged overdraft charges (it says banks make £1.2 billion a year from these charges); and give SMEs more information about bank charges, service quality and credit availability.
It says it will be working with HM Treasury, Financial Conduct Authority (FCA), Bacs and Nesta on these solutions. The latter (formerly NESTA, National Endowment for Science, Technology and the Arts) is an independent charity that works to increase innovation in the UK.
A 15-page overview of the investigation can be found here. The CMA’s “remedy map” is below: