There are fresh calls today for banking services to become more competitive and transparent for small and medium sized businesses in the UK.
The Competition and Markets Authority (CMA) claim an investigation by them has highlighted that competitive pressures are weak so banks don’t currently need to work hard enough on price or quality of service. They’ve highlighted the need for the development of new online comparison tools and improvements to the current account switch service (CASS) to make switching banks more straightforward and give private and commercial customers more awareness of, and confidence in, the process.
The CMA’s proposals include new measures targeted at overdrafts, with a particular focus on users of unarranged overdrafts; in 2014, £1.2 billion of banks’ revenues came from unarranged overdraft charges. Banks are being urged to put a cap on unarranged overdraft fees and give out warnings to customers before they are overdrawn. Some banks already cap their overdraft fees but the CMA is pointing the finger at those who do not.
The watchdog claims nearly half of customers had stayed with their bank for more than 10 years and that a massive 90 per cent of small and medium-sized firms took out business loans with the same bank that held their current account.
Head of Businesscomparison.com Philip Brennan welcomes the investigation and recommendations:
“The work of the CMA highlights that the banks have been relying on the loyalty of the business community for far too long and not necessarily given them a fair service in return. Their conclusions match our own observations about the financial marketplace for SMEs which is exactly why we established Businesscomparison.com. We facilitate business comparison both in banking and across all financial products such as insurance, energy, mortgages and loans. More competition will mean better deals for business owners up and down the country and that’s what we promote.”
Alasdair Smith, Chair of the Retail Banking Investigation, said:
“For too long, banks have been able to sit back and not work hard enough for their personal and small business customers. We believe the strong and innovative package of measures we are proposing will give customers the information and tools they really need to get a better deal out of the banks. They will also protect those who fall into overdraft from being stung with unexpected fees.
“New entrants into a market are an important source of competition and innovation, and we are well aware of the current barriers to challenger banks in UK retail banking. What’s really holding them back is their ability to highlight to customers how new offerings compare with their current deal. Our package of banking reforms will help new competitors get a stronger foothold in a market which is of vital importance to the whole economy.”