Banking watchdog CMA unveils package of measures to help customers switch accounts after two year probe

Proposals dubbed too little, too late by consumer groups and smaller lenders

The watchdog also said banks must make it easier to switch accounts (Getty)

The Competition and Markets Authority ordered a technological “revolution” in retail banking, following an almost two-year investigation.

The watchdog also said banks must make it easier to switch accounts and set a cap on overdraft fees, but smaller banks have said the reforms do not go far enough.

The CMA said it wanted banks to implement “Open Banking” by early 2018 - a package of measures that enables customers to manage accounts with multiple banks through one mobile app. The regulator also called for measures to help customers switch accounts between financial institutions.

Alasdair Smith, chairman of the investigation said: “Our central reform is the Open Banking programme to harness the technological changes which we have seen transform other markets.

“We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs.”

Customers should be able to see information including prices for a variety of products and the location of branches through one smartphone app, the watchdog said.

The reform will spark security fears as the technology requires sharing of customer information through technology known as an Application Programming Interface (API), similar to that used by Facebook and Uber.

How the CMA says its refoms will help customers (CMA)

Overdraft fees

The CMA recommended banks set their own Maximum Monthly Charge on overdraft fees and a grace period for customers to avoid them, rather than have the fees “centrally regulated”, the watchdog said in a statement on Tuesday. In 2014, banks received £1.2bn pounds in revenue from the fees.

The regulator also announced the creation of the Current Account Switching Service, a new body tasked with ensuring it is easier to change provider. Currently only 3 per cent of customers change banks each year.

“The reforms we have announced today will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks,” Mr Smith said. “Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.“

The report is the regulator’s second attempt at improving the banking services customers receive in a year. In October the CMA stopped far short of breaking up the banks or ending free checking accounts, a decision criticised by MPs.

‘Too little too late’

The latest proposals were dubbed too little, too late by consumer groups when the CMA published its provisional findings in May, a refrain that was repeated on Tuesday by smaller lenders.

“The CMA has played right into the hands of the big five banks and missed a golden opportunity to enable people across the UK to get a better deal from their banks,” said Paul Pester, chief executive officer of TSB.

“The CMA’s report is only the first rung on the ladder and, while disappointing, it should not constrain the Government in its ambition to achieve a truly competitive banking market.”

Additional reporting by Bloomberg