AFTER 10 investigations into the personal banking sector this millennium, it’s fair to say that no-one was holding their breath as the competitions watchdog prepared to publish its findings on Thursday.
Some hoped the Competition and Markets Authority (CMA) would decide that the monopoly in current accounts was no longer tenable, that the so-called “free” banking model wasn’t working and that significant structural change was required.
Instead, the CMA reeled off a list of problems we already knew existed – switching is low, comparing accounts is difficult, competition isn’t really working – and then offered nothing more than a few piecemeal remedies. It offered plenty on stimulating demand for switching, by improving the information available and making it easier to compare accounts, but nothing on the supply side.
The news headlines were led by the CMA’s assertion that bank customers could save £70 a year from switching current account, rising to £260 a year for those regularly overdrawn. This overlooks the fact that many of the big banks offer switching incentives ranging from £100 to £150 – and people still aren’t biting.
The seven-day switching service that launched amid great fanfare two years ago has had little impact, with just 3 per cent of current account customers using it in 2014. The hassle factor of switching is covered in the CMA report, but it fails to address the reason it feels like a hassle – it doesn’t seem worth it as the alternatives aren’t evidently better.
Most current account customers still feel relatively satisfied with their provider, if begrudgingly. Why? Our expectations are low. Very low. As long as our bank is vaguely competent, doesn’t rip us off too badly and lets us take our money out when we need it, we’re generally OK with it, even if the service is a bit rubbish.
With the CMA unprepared to propose the structural overhaul needed, it will take something radical from one of the challenger banks now entering the market for anything to really change.
The CMA concluded, after 18 months of scrutinising the current account market, that it’s not excessively concentrated, even though the Big Four – RBS, Lloyds, Barclays and HSBC – account for 85 per cent of small business bank accounts and more than three-quarters of personal current accounts.
This is perhaps further evidence of the mood change since the Conservative victory in May’s election. The message now is that it’s time to give the poor, defenceless banks a break and let the pendulum swing back to a lighter, less consumer-focused regulatory model.
It’s a shift that has seen Martin Wheatley sacked as chief executive of the Financial Conduct Authority and Daniel Godfrey ousted from the same role at the Investment Association, the fund management trade body. In both cases their perceived crime was to be too sympathetic to consumers.
This is the climate in which the CMA operates. One in which any threat to the banks is met with a warning from the likes of HSBC that they’ll take their business out of the UK.
The CMA’s report doesn’t make entirely comfortable reading for the status quo. But banks won’t be losing any sleep ahead of the final report next year.