CMA announces reforms to ensure banks work harder for small business
Banks are now required to offer objective information on quality of service and have to alert customers when they enter an unarranged overdraft
Measures to ensure banks work harder to look after and retain small business customers are to be introduced by the Competition and Markets Authority (CMA) following its investigation into the retail banking market which published today.
The CMA’s report has concluded that older and larger banks do not compete hard enough for customers while smaller rivals find it difficult to grow, meaning bank customers tyupically pay more and don’t benefit from new services.
The key reforms outlined by the CMA include:
- A requirement for banks to implement Open Banking by 2018, enabling small businesses to securely share their data with other banks. This will allow them to manage multiple accounts through a single app, maintain greater control of their funds and compare the benefits of different products.
- Banks will be required to make trustworthy and objective information on quality of service available online and in-branch and will need to send out periodic information on events such as branch closures or an increase in charges.
- With unarranged overdraft users accounting for 25% of small business and personal account customers, the CMA will force banks to send alerts to customers going into an unarranged overdraft to help them avoid charges.
The CMA also reported that small businesses lack access to tools with comprehensive information on bank charges, quality of service and credit availability.
In light of this, banks will now have to provide the independent charity Nesta with financial backing and technical support, and banks will have to introduce a range of measures for small businesses including a loan eligibility tool.
Alasdair Smith, chair of the retail banking investigation, said: “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 UK economy.”