Comparing business bank accounts is crucial, says CMAMay 17, 2016
Today the Competition and Markets Authority released provisional findings from its ongoing Retail Banking Investigation. The report is part of the CMA’s effort to find ways to encourage competition and transparency for both personal and business banking, and today’s release comes with some important insights into the current state of business banking.
The report highlights some interesting statistics, including the fact that over 90% of businesses use the same bank for business accounts as they do for personal accounts – showing that “competitive pressures are weak, so banks do not need to work hard enough on price or quality of service.”
The CMA set down a number of recommended actions, including:
- Pushing the development of online comparison tools to make it easier for businesses to choose the right bank account for their needs
- Requiring banks to introduce an Open API, which would allow businesses to securely share their transaction history with other banks and third parties, and get account comparisons based on their individual situations
- Requiring banks to prompt their customers to use comparison services regularly to ensure they’re always using the bank account that’s best for them
The Chair of the Retail Banking Investigation, Alasdair Smith, said:
For too long, banks have been able to sit back and not work hard enough for their personal and small business customers. We believe the strong and innovative package of measures we are proposing will give customers the information and tools they really need to get a better deal out of the banks. They will also protect those who fall into overdraft from being stung with unexpected fees.
New entrants into a market are an important source of competition and innovation, and we are well aware of the current barriers to challenger banks in UK retail banking. What’s really holding them back is their ability to highlight to customers how new offerings compare with their current deal. Our package of banking reforms will help new competitors get a stronger foothold in a market which is of vital importance to the whole economy.
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