News

UK competition authority makes banks 'work harder for customers'

August 9, 2016

The Competition and Market Authority in the U.K. has released a set of reforms intended to "ensure that [bank] customers benefit from from technological advances and that new entrants and smaller providers are able to compete more fairly," according to a press release about the decision.

The authority announced key measures that include:

• A requirement that banks implement "Open Banking" by early 2018 to accelerate technological change in the U.K. retail banking sector. Open Banking will allow 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 digital 'app'; to take more control of their funds (for example, to avoid overdraft charges and manage cashflow); and to compare products.
• A requirement that banks 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. The authority will also require banks to publish and make available a range of other quality measures.
• A requirement that banks send out periodic and event-based prompts, such as notices about the closure of a local branch or an increase in charges, to remind their customers to review whether they are getting the best value.

The authority also introduced specific measures to benefit what it described as "unarranged overdraft users," who make up approximately 25 percent of all personal current account customers and small businesses.

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

"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," Alasdair Smith, chair of the retail banking investigation, said in a statement. "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 U.K. economy."