FCA Help Move Open Banking Proposals to Implementation

10 Nov 2016 04:18 PM

FCA Take Forward CMA Recommendations around Account Switching & Overdraft Rules

Following the Competition and Market Authority’s (CMA) decision to harness technology in its retail banking revolution, the Financial Conduct Authority (FCA) is now taking forward a number of its requirements to improve competition in the market for current accounts.

The CMA identified a number of barriers to competition in the retail banking market which result in a situation whereby incumbent Banks do not have to work hard enough to win business and retain customers, while new innovative entrants struggle to penetrate the market. Consumer apathy around switching, complicated fee structures and imperfect information were cited as key barriers. The CMA has found that market failure in retail banking has its most pronounced effect on overdraft users and small business customers, with only 3% of consumers and 4% of businesses switching provider every year.

The FCA will now take action in the following areas:

• Researching, testing and implementing measures to increase consumers’ engagement with their overdraft use and charges, also considering the need for rules in relation to the proposed Monthly Maximum Charge (MMC) and beginning to collect data in 2017 in order to do this
• Acting as an observer on the Open Bank Steering Group in order to promote innovation in retail banking
• Considering the requirement on banks to publish better and comparable information on service quality and customer engagement (setting up an expert group to achieve this)
• Developing and testing 'prompts' which encourage consumers to consider their banking arrangements

techUK welcomed the CMA’s endeavours in stimulating competition in the retail banking markets for both personal and business customers; the measures will provide greater control for participants in finding best fit products and services as well as maintain a level playing field for new market entrants. Concerns do remain however around capital requirements applied to new market entrants in addition to longstanding consumer apathy around account switching as well as devising such a system that offers the greater control in a secure and permissioned manner.

techUK members are feeding into CMA’s implementation entity, via its Digital Banking & Open API Working Group, to ensure a flexible and supportive regulatory regime, a willingness from established players to implement the changes and that the voice of the technology industry is heard during implementation.

For more information, please contact ruth.milligan@techuk.org and james.lee@techuk.org

Please see here for the FCA's response to the CMA's final report, in full.