Following a two year inquiry, this week Britain’s High Street banks have been ordered by the Competition and Markets Authority to launch a technological revolution.
The CMA concluded that new phone-based apps should be brought in by early 2018. The new apps will allow customers to see information about prices, standards and the location of High Street branches. Most importantly, it will allow consumers to see which bank is cheapest, given their particular pattern of borrowing.
Banks will also be required to send customers text alerts, whenever they go overdrawn – something which most banks already do
All the banks will be required to introduce a Maximum Monthly Charge (MMC) – set by themselves – to limit the costs of an unarranged overdraft. At the moment most banks cap overdraft fees, but then add on interest payments. The MMC will include debit interest – typically charged at up to 20% a year – and unpaid item fees.
The CMA said this would make different bank accounts easier to compare, and cut through the complexities of overdraft charges. However ultimately banks would still be able to charge what they like.
Following the inquiry, there will be also begin to be further measures to encourage people to switch accounts. The findings of the inquiry found that currently only 3% of personal customers move their accounts each year. The CMA have facilitated the introduction of a new regulator to oversee the Current Account Switching Service, a longer period during which transactions will be redirected from the old account to the new account (the length of time of which is currently three years), and a long-term promotional campaign to encourage more switching.
Under what the CMA calls its “Open Banking programme”, banks will be required to make it possible to share customers’ data on new apps – however individual customers will have to give their consent before this happens.
The consumer group Which? welcomed the findings of the inquiry, but said it was questionable whether the measures would be enough to promote more competition. However the changes do sound promising for customers.