A report out today by the Competition and Markets Authority (CMA) claims that customers could save a whopping £70.00 a year by switching from their current bank to a new provider, after an 18 month inquiry, the (CMA) has stopped short of recommending a breakup of the banks, but it did say that customers should be prompted to change providers if their branch closes or they are overcharged by their current provider.
The investigation has identified a number of competition problems in both the personal current account (PCA) and small and medium-sized enterprise (SME) banking markets. Low levels of customer switching mean that banks are not put under enough competitive pressure, and new products and new banks do not attract customers quickly enough. There is a particular problem in SME banking where many SMEs open their business current accounts (BCA) at the same bank where they have their PCA, then stick with that bank for their business loans.
57% of consumers have been with their current account provider for more than 10 years, and 37% for more than 20 years!
Customers with current accounts are faced with complex overdraft charges and limited information on product and service quality, which, along with limited effective comparison tools, makes it very difficult for customers to know what they are paying and to compare banks and products.
Bank customers fear that switching their current account to a new bank will be complicated, time-consuming and risky. The Current Account Switch Service (CASS) was set up to make the process easier and is functioning reasonably well, but awareness and confidence remain low. Only 3% of customers switched their PCA in 2014 and just 16% looked at alternative accounts.
Provisional recommendations made by the CMA suggests:
- Banks should be required to prompt customers to switch at certain trigger points, for example if their bank closes or overdraft charges change
- Making it easier for customers to switch by up-grading Midata, a service which allows customers to see their transaction history
- Setting up a new price comparison website for small businesses
- Banks should fund a “sustained” advertising campaign for the Current Account Switching Service (CASS)
DGOT says, we have always been fans of getting out there and finding the best deal on the market, this report highlights the need for better competition between the banks, if you have been with your current provider for the reported 10 or even 20 years, we would suggest that you look around for the best deal. Want to know how to switch, read our Explainer HERE