You are here: Home - Saving & Banking - News -

Banks told to undergo tech revolution to boost switching

Written by:
High street banks have been told to implement a range of new measures to promote competition in the sector including enabling customers to manage accounts from different providers through one single smartphone app.

Following a two-year year investigation into the retail banking industry, the Competition and Markets Authority (CMA) outlined a package of measures to ensure “banks work harder for customers” and the “benefits of new technology are fully exploited”.

The apps, which should be available from early 2018, will allow customers to access information about the best bank services and prices and they will be able to authorise the movement of funds between current and deposit accounts to help avoid overdraft charges or to benefit from higher interest payments.

This will be done using technology called APIs, used by the likes of Facebook and Uber, to make it simpler for people to share information.

The competition watchdog will also require banks to send out ‘prompts’ to remind their customers to review whether they are getting the best value and will make banks publish objective reviews of their service on their websites and in branches.

The CMA has also introduced specific measures to benefit unarranged overdraft users.

Banks will be required to send alerts to customers going into unarranged overdraft, and inform them of a grace period, to avoid charges

They will also have to set a monthly cap on unarranged charges, in the form of a monthly maximum charge (MMC). The MMC will be the maximum amount a bank can charge a month including debt interest and banks will be required to disclose the MMC to customers.

Alasdair Smith, chair of the retail banking investigation, said: “The reforms we have announced today will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks.

“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.”

However, experts say the range of measures do not go far enough.

Andrew Hagger of Moneycomms said: “This is not the radical overhaul of the current account market that people had been hoping for and it will be some time before we see whether the new proposals give more consumers the desire and confidence to switch banks.

“Text alerting is already common among the banks and while forcing them to publish a MMC (maximum monthly charge) maybe seen by some as a useful yardstick, you have to question whether anyone should be choosing a bank based on the amount it could charge for unauthorised borrowing.

“For those customers who regularly exceed their agreed overdraft and incur unauthorised borrowing costs they will still find it difficult to move banks even with the proposed API technology as they will be considered too much of a risk and deemed unable to manage their finances.”

Kevin Mountford, banking expert at MoneySuperMarket, said: “Those looking for wholesale reform of the banking market are likely to be holding their heads in their hands this morning. The CMA’s final remedies are more ‘gently does it’, as opposed to the seminal, watershed moment for British banking that many had been looking for.

“The CMA’s focus on the Open API banking standard is a source for optimism. APIs are already being used to great effect in other industries and could transform the customer experience in everyday banking. Making such a standard a success, though, will rely on widespread industry engagement. Given the tight timelines, we need clarity on how these changes will be mandated, governed and measured so that consumers and SMEs reap the benefits.”


There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

ISAs: your back-to-basics guide for 2018/19

Here’s everything you need to know to make the most of your unused ISA allowance ahead of the 5 April deadli...

A guide to Sharia savings accounts

A number of Sharia savings products have upped their game in recent months, beating more familiar competitors ...

Five ways to get on the property ladder without the Bank of Mum and Dad

A report suggests the Bank of Mum and Dad is running low on funds. Fortunately, there are other options for st...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

  • RT @STEPSociety: UK Ministry of Justice abandons plan to increase EW probate fees, described by STEP’s Emily Deane TEP as a stealth tax on…
  • RT @STEPSociety: UK Ministry of Justice abandons plan to increase EW probate fees, described by STEP’s Emily Deane TEP as a stealth tax on…
  • RT @STEPSociety: UK Ministry of Justice abandons plan to increase EW probate fees, described by STEP’s Emily Deane TEP as a stealth tax on…

Read previous post:
Brexit adds £400 to the cost of family summer holiday

The cost of a family summer holiday is £400 more expensive than this time last year thanks to the value...