Retail banks up for current account review
The Office of Fair Trading has launched a review of the personal current account market and outlined a longer term programme of work aimed at addressing competition concerns and a lack of customer focus across the wider retail banking market.
The OFT will look at whether or not initiatives put in place in 2008 to make the process of switching accounts easier and statement and charges easier to understand.
The review forms part of a wider programme of work designed to achieve a more competitive and customer focused retail banking sector. If enough progress has not been made there is a possibility of the regulator requesting the industry be examined by the Competition Comission.
Claire Hart, OFT Director said: “We committed to keeping the personal current account market under scrutiny following our 2008 study.
Through this review we want to understand what progress banks have made in providing customers with better information about account charges, greater control over their accounts and easier account switching facilities.”
The OFT also intends to consider the operation of payments systems and the banking market for small and medium-sized enterprises, over the next two years.
Hart added: “More generally, we are concerned that a lack of effective competition means the retail banking sector is not working in the interest of customers and businesses. We want to see banks become more customer-focused and this will be the central theme of our programme of work going forward.”
Consumer behaviour will also be scrutinised, as the regulator will look in detail at the way in which consumers make decisions and engage with retail banking services, including through applying behavioural economics.
Kevin Mountford, head of banking at MoneySupermarket, said: “The decision by the OFT to investigate the UK current account market is welcome and comes off the back of the findings of the recent Vickers Report, which made some recommendations to improve competition in the sector. The creation of new switching rules and the auto-redirection of bank account numbers between providers will make the process of switching easier.
“The recent turmoil in the banking sector has shown a desire from consumers to vote with their feet. A recent MoneySupermarket poll showed that a fifth of banking customers have lost trust in their bank as a result and will move elsewhere, so we may be at a tipping point in terms of customers looking at viable alternatives to the big four, who control the majority of the personal current account sector.”
Recently, banks have been embroiled in a series of scandals ranging from rigging the Libor, the rate in which banks lend to each other, to misspelling payment protection insurance. Banks are in the process of paying back £9bn for the latter.
The OFT plans to publish its personal current account review by the end of 2012.