9th August 2016
The competition watchdog is to require banks to set a minimum monthly limit on charges for unauthorised overdraft limits by early 2018.
The move is part of a raft of measures to be ordered by the Competition and Markets Authority. It will also create a new phone-based app which will show customers which bank is offering the best rates and highest charges taking advantage of data developments.
The CMA will require banks to implement a new ‘Open Banking’ system by early 2018 aimed at accelerating technological change in the UK retail banking sector.
The system will allow personal customers and small businesses to share their data securely with other banks and with third parties. The CMA says that this will enable customers “to manage their accounts with multiple providers through a single digital ‘app’, to take more control of their funds for example to avoid overdraft charges and manage cashflow and to compare products on the basis of their own requirements”.
The CMA will also require 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 will also force banks to send out regular event-based ‘prompts’ to customers such as telling customers about the closure of a local branch or about an increase in charges, to remind their customers to review whether they are getting the best value and to switch banks if not.
The CMA says that unlike many other financial products such as home insurance, current accounts do not have annual renewal dates to act as natural reminders and other possible triggers like business growth are not prompting customers to review what they are getting from their bank.
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.
“Our central reform is the Open Banking programme to harness the technological changes which we have seen transform other markets. We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs.”