This is a real banking revolution: the CMA (Competitions and Markets Authority) announced some stringent rules for banks in the UK to comply with by 2018. This throws the gates wide open to competitors, and will have banks scrambling to attract customers.
As the banking industry has been slow to respond with innovations, the CMA has made it clear that it expects to utilise its own enforcement powers, in addition to expecting reform from the government to push through change. While some commentators believe the change is not far enough, I am of the view that steps in the direction of major change start slowly and momentum builds quickly.
These changes include:
- Open Banking by 2018 – by which the CMA means to accelerate mobile banking in the UK retail banking sector. SME’s and individuals will be free to share their banking data securely with other banks and third parties, enabling them to manage their accounts with a range of providers through a single App – thus having more control over their money and also being able to shop around for better deals. Banking on the move, having your bank in your phone is the way of the future.
- Accurate, unbiased information about their services and truthful information about products and quality of service – from their branches to their websites. there is much agreement that with a significant range of fintech investment both within the industry itself, as well as new players, banking as it currently stands will undergo drastic change.
- Making event- based communication compulsory – for example if a branch closes or there is an increase of charges, they have to send their customers notice of these happenings. THIS was raised to provide trigger points for review of banking products - like the insurance sector which has an annual policy renewal as a trigger to prompt considerations of cost, cover, benefits and performance of an insurer.
The CMA has also made it clear that it is to be made easier for customers to search for banks offering more competitive rates and to enable easier account switching.
Apparently only 3% of individuals and 4% of businesses ever change their banks in a year, despite the huge savings this could provide.
A range of other measures has also been announced - for example, those of you who may have been surprised to find that you are in an unarranged overdraft, without ever having arranged one, the CMA has introduced specific measures including that the bank needs to alert you before this happens, and offer you a grace period. It was found that banks in the UK make an unbelievable £ 1.2 billion a year from unarranged overdrafts.
By 2018, SME's should be in a much better banking position after the Competition Marketing Authority's findings
Businesses and individuals win all round with the banks having to provide accurate information on banking services and charges for small business. One of the key assessments is that small business had lacked the tools needed to assess fair credit and availability and service quality.
In order to progress further, the CMA will be supporting Nesta. This requires banks to provide financial backing and technical support for this innovation-supporting charity that aims to partner and work with organisations who need information and expertise on the practice and theory of innovation.
This initial level of game-changing recommendations will make the United Kingdom the most attractive banking hub for customers as well as provide another example of leading the way in innovation, particularly relating to small and medium businesses.
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