Small business leaders have welcomed provisional recommendations from the Competition and Markets Authority (CMA) on changes to the retail banking sector.
The CMA’s recommendations included changes that would make it easier for the UK’s small business owners to compare banks and switch more easily to get a better deal.
In a report published on 17 May, the CMA addressed some of the less commonly seen practices of high street banks that often impact small business owners, including 1.2bn in unauthorised overdrafts, proposals for a cap on maximum fees and the introduction of prompts for overdrafts at the end of free banking periods.
It is hoped that the CMA’s report will encourage small business owners to shop around more and switch between banking products.
National chairman of the Federation of Small Businesses (FSB), Mike Cherry, said: Today’s banking market does not work well for small businesses. Current levels of switching between current accounts amongst small firms are far too low, with only four per cent of FSB members switching in the last year.
‘small business owners are still not confident that switching banking products or services will be a risk-free, seamless process, and as a result, many choose not to switch. A new awareness campaign and measures to make switching transparent are promising steps, added Cherry.
The CMA also considered how innovation could help increase competition between banks. An open, accessible online banking standard could allow business customers to safely share transactional history with other banks, providing greater choice, for example.
Commenting on the CMA’s recommendations, MarketInvoice co-founder and CEO Anil Stocker said that it laid the groundwork for a level playing field in small business finance, but that the proposals did not go far enough for alternative lenders.
“Alternative lenders and new fintech players have been crying out for opening API standards for some time, the proposals provide a solid starting point on which to build a culture of open data in finance, added Stocker.
The recommendations follow a move by the government earlier this year to increase competition in the small business lending market. On 1 April, the government launched a small business data sharing scheme, involving nine high street lenders and three credit reference agencies (CRAs), designed to make it easier for emerging banks and alternative lenders to check the creditworthiness of small and new business customers.
There’s still one thing small business owners still trust banks to do well. Read on to find out what it is.