FCA targets current account market competition

The Financial Conduct Authority (FCA) has today announced that it will take action to improve competition in the current account market.

The move follows a series of recommendations which were proposed by the Competition and Markets Authority (CMA) as part of its investigation into retail banking.

Christopher Woolard, executive director of Strategy and Competition at the FCA, said: “It’s important that competition works well in the retail banking sector. Our work, taking action in response to the CMA’s recommendations, will help to further drive effective competition by helping customers and small businesses to take more control of their finances.

“Our role in regulating retail banking markets goes beyond the remedies the CMA has asked us to take forward, and we will continue to look more broadly at how well these markets work, with a particular focus planned on high-cost credit including overdrafts. We will also be looking at wider retail banking business models.”

The FCA said it will take action in the following areas:

Improved transparency for overdraft users

The CMA recommended that the FCA research, test and implement measures to increase consumers’ engagement with their overdraft use and charges, and the FCA will take action in response to this recommendation. The FCA said it will also consider the need for rules in relation to the proposed Monthly Maximum Charge (MMC) and will begin to collect data in 2017 in order to do this.

In addition, beyond the scope of the CMA’s recommendations, the FCA will also undertake work on overdrafts (both arranged and unarranged). This will fall within the FCA’s future work on high-cost credit and the FCA will publish more detail on the scope of this work in a Call for Input later this year.

Promoting innovation

Following the introduction of the Open Banking standard, the FCA says it will take forward the other recommendations from the CMA, which includes acting as an observer on the Open Banking steering group.

Improving service and prompting increased customer engagement

To help consumers assess the differences in service quality between banks, the FCA will consider requiring banks to publish better, comparable information. The FCA will set up an expert group to consider what information should be published.

The CMA also recommended that the FCA develop and test “prompts” encouraging consumers to consider their banking arrangements. For both individual consumers and small and medium-sized enterprises, the FCA said it will research which prompts are most likely to help consumers understand their account usage and how much their account costs, and encourage them to consider switching. This research and testing will begin in early 2017.

Beyond current accounts

Additionally, the FCA are to continue considering the competition and conduct implications of the business model links between current accounts and other retail banking products.

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