The proposals will also force banks to communicate better with customers likely to go overdrawn.
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The CMA said, despite this, someone could save £92 a year on average by switching to a deal that better suits their needs.
At the moment only three percent of personal and four percent of business customers switch to a different bank in any year.
Despite these welcome developments, we have found that many problems remain.
“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 United Kingdom economy”, he said. Current levels of switching among small firms are far too low, with only four per cent of FSB members switching in the previous year.
Currently, the CASS guarantees that switching bank account should take no longer than a week and any regular payments will be transferred automatically. Moving banks, irrelevant of the money which can be saved is too hard, thus making growth for challenger banks more hard and not encouraging competition in the industry.
Send out suitable “prompts” such as on the closure of a local branch or an increase in charges.
The CMA said “many people are paying more than they should and are not benefiting from new services”.
In the worse cases, some lenders have levied charges of more than £55 a month for unauthorised overdrafts.
Bank charges are “complicated and opaque” and many customers see switching banks as “risky”, the watchdog has said. We’ve seen a year-on-year increase of 25% to 4.1 million active mobile users, with 30% of the logons to our app now using biometrics. This will work in a similar way to eligibility checks for credit cards.
This, the CMA says, will help customers to have greater control over their money – for instance, by managing cashflow with greater ease and thereby avoiding overdraft charges.
The watchdog has previously suggested banks should cap customers’ monthly unarranged overdraft costs. He commented: “Our current system of free-in-credit banking reinforces the dominance of the UK’s major banks and doesn’t allow for customer-focused challengers to offer true innovation”.
Banks will also be required to set a ceiling on unarranged overdraft charges.
The UK’s largest high street banks will be collectively responsible for establishing the open API, which must be completed between January 2017 and March 2018. Though it may sound abstract and tiresome, it’s potentially the biggest shakeup of banking in decades.
Nice idea. However, you get the impression that most people look at their bank accounts as little more than somewhere to store their money, and as such, can’t be bothered messing around looking for interest rates and looking into charges.
Apps to let customers make simple, safe and reliable price and service quality comparisons tailored to their own usage patterns.
“The reforms we have announced today will shake up retail banking for years to come”.
Alasdair Smith, chair of the retail banking investigation, said open banking is at the heart of the reforms announced today.
The Government launched the review over concerns customers were getting a poor deal because Britain’s biggest banks, which all offer similar accounts and services, had a market monopoly and were not competitive enough.
Anthony Browne, chief executive of the British Bankers Association, says: “Banks compete to attract and retain customers every day”.
A recent Which? investigation found customers can be charged several times the amount for an unarranged overdraft at a bank than they would be charged by a payday lender.
The CMA also ordered further measures to encourage people to switch accounts.
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It has previously said its proposed remedies could bring benefits to bank customers to the tune of £1 billion over five years.
