The Competition and Markets Authority (CMA) has issued a final order to implement retail banking reforms that will improve access to finance for small businesses and make banking more competitive.
A timetable for rolling out a series of landmark reforms, that will require banks to work harder on behalf of their customers, has been formally agreed.
The CMA’s shake-up will see banks having to introduce maximum monthly unassigned overdraft charges, standard procedures for opening business current accounts, and regularly published quality-of-service statistics.
The reforms contribute to a general overhaul of the retail banking market – a move towards an era of what’s been dubbed “open banking” by the CMA.
Commenting on the announcement, the chairman of the government’s recent retail banking investigation, Alasdair Smith, said: “Open Banking will make a transformational change to banking for personal customers and small businesses.
“For the first time innovative and secure apps will provide personalised services and information to cover all financial needs in one place, and make it easy for people to find out what bank account is best for them.”
The CMA has claimed that in practical terms, the reforms mean banks will be offering overdraft users the chance to save around £180 a year on average, whilst other current account holders can save an average of £92 a year.
Individuals and business owners about to slip into overdrafts will be sent alerts to help them try and avoid unnecessary fees, after the CMA revealed that lenders receive £1.2bn a year in total from unassigned overdraft charges.
Smith added: “A new alert system, combined with our order to require them to publicly announce their maximum monthly charges, should mean significant savings in future for their hard-pressed customers.”
The Financial Conduct Authority (FCA) is now expected to act in response to the CMA’s final order. It will consider the steps banks need to take to deliver open banking, and test prompts and alerts that increase customer engagement and awareness of their overdraft usage.
In March, banks will be expected to release the first stage of data related to open banking developments, while maximum monthly charges on non-agreed overdrafts are required to be introduced in August.
Switching between banks to be made easier for small firms
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