British high street banks have been asked to launch a tech “revolution” in an attempt to promote better competition across the sector.
Following a two-year inquiry, the Competition and Markets Authority (CMA) said today that new phone apps should be launched by early 2018.
The final report published by the CMA concludes that older and bigger banks do not have to compete hard enough for customers’ business and that smaller and newer banks find it more difficult to grow.
This, the report adds, means that many consumers are paying greater fees and not necessarily benefiting from new services.
Alasdair Smith, chair of the retail banking investigation, said that the reforms announced today would shake up retail banking for years to come and ensure that both personal and small businesses to secure better deals with their banks.
“We are breaking down the barriers which have made it too easy for established banks to hold on to their customers. Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.
“Our central reform is the Open Banking programme to harness the technological changes which we have seen transform other markets. We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs,” he added.
Sophie Guibaud, VP of European Expansion at Fidor Bank, commented on the findings:
“Consumers have been suffering for far too long from complicated current account prices. It’s now time for the banks to make their prices clearer for everyone, whilst putting in place measures to help customers choose the best current account and service for them.”
“In the future, we believe that more people will end up switching their banking services to different providers when they see clear differences in the offers available to them. With new banks coming to the market with more innovative and targeted offerings, the percentage of people switching services in the future will certainly increase,” added the VP.
Gary Turner, UK co-founder and managing director of Xero, said: “The CMA instruction today for banks to provide digital access to customer transaction data is excellent news for small businesses.”
“We have been lobbying British banks for years, with some success latterly it should be said, to provide digital connections between banks and online accounting software products such as Xero.
“While UK banks have made progress in this areas in the last two years, Barclays, RBS, Natwest, HSBC, Metro Bank, Santander all provide Xero customers with daily digital bank feeds, however, the customer experience could be so much better and easier,” noted Turner.
‘Dragged into 21st century’
Daniel Hegarty, CEO and founder of digital mortgage broker habito, welcomed the news, saying:
“It’s great news for consumers that the big banks are being dragged into the 21st century. But even the ideas being announced today will take a couple of years to have a positive impact on consumers – that’s a lifetime in the world of digital technology.”
“Meanwhile new players like us will go on making previously overwhelming personal finance decisions – like getting a mortgage – easier, quicker and cheaper through our websites and apps. That’s helping people take control of their personal finances and changing consumer expectations rapidly. The incumbents are struggling to keep up with this, but at least today’s CMA report is a step in the right direction,” he added.
Paul Rippon, Mondo’s deputy CEO, shared his views, noting that generating more competition in the space was a positive thing.
“Naturally, as the new kids on the block, we at Mondo welcome all measures being taken by the CMA to encourage greater competition in retail banking.
“In this stagnant market, where only 3% of personal account customers switch banks in any given year, what’s needed is a lot more competition to force change … One recommendation from the report is that banks should be required to send alerts to their customers when they go into an unarranged overdraft, either by text message or mobile push notification,” he concluded.
Nick White, senior vice President of Group Product at Monitise, commented: “The industry has been debating whether the revised EU directive on payment services (PSDII) should be implemented post Brexit, but the CMA’s suggested reform will steamroller the industry to progressive banking. The expectation is that by 2018 UK retail banks will have implemented open banking.
“Customers want and expect to seamlessly use whatever is at their disposal via phone apps. The CMA reform will force banks to take the initiative into finding solutions for easier comparison services, payments, better insights into everyday spending, cross selling and up-selling. This is likely to improve communications between banks and their customers as they might be required to send out suitable periodic and event-based ‘prompts’,” added White.’
‘Leading the way’
Chris Gledhill, CEO & co-founder of Secco Bank, told Tech City News: “One of the many reasons the UK is FinTech capital of the world is our competent and progressive regulatory ecosystem.”
He continued: “The CMA report into the UK retail banking market and its recommendations form the latest edition to our regulatory framework and I expect other geographies will be following UK lead. On the whole the recommendations are positive. Giving customers enhanced access to their transactional data, keeping them informed on the level of service they are provided with and providing them the opportunity to avoid unexpected overdraft fees are all a victory for consumer protection.”
Paul Haydock, CEO of DueCourse, said: “The CMA’s proposed reforms of the retail banking industry need to be taken seriously by the big banks.
“Technology can and should democratise banking and finance, making it fairer and more accessible for consumers, whether private or corporate. In an age when data is king, retail banks need to embrace its availability and power to provide a more competitive and transparent offering for their customers.
“The banks need to engage and embrace the booming Financial Technology (FinTech) community to take advantage of its culture of fast innovation in order to keep pace with the speed of change. FinTech companies like DueCourse are constantly working to improve and develop our technology that allows us to deliver access to money in an easy and convenient way to SMEs. Without this investment and commitment to technology, businesses offering financial services will struggle to grow and remain relevant to customers in a digital age.
“As the CEO of a FinTech SME, it’s long been clear to me that by making services straight forward to use, easily accessible and being transparent with customers over cost is the key to building trust. I hope the banks will follow suit and embrace the CMA’s recommendations,” concluded Haydock.
Shachar Bialick, CEO of Curve, told Tech City News: “The future is not a better bank – it’s something different.
“If banks can put into place the CMA ruling on opening up banking services, this is a great thing. It will encourage competition and allow people to get closer to their money – giving them access to better tools (budgeting, mortgages, credit) right from their phone.
“Banks are not tech companies. They cannot match the speed and know-how that tech companies have today. At Curve, we believe that the end-game would be an app that connects people to various money services, tailored to them: a service that gets them closer to the money services they love and trust, as well as new ones from alternative companies. The CMA ruling brings us closer to this reality.
“Even if banks manage to create a mobile banking app that is 20 years ahead of its time, it will still not do the job. When it comes to money, people want the best possible solution. One that saves them money and time. As long as banks continue to offer only their own products, rather than open their user base to the best available offers, even if it’s a competitor, there would not be a real change, even if the banking app is 20 years ahead of its time,” concluded Bialick.
‘A whole new level’
BookingBug’s CEO Glenn Shoosmith said: “From our experience working with retail bank, we believe the initiative will make comparing banks on their most common services even simpler and completely moves the battle lines for competition. But not in the direction you might first think.
“Competition to handle customers’ everyday ‘transactional’ services has already become more pressured, with specialist apps and challenger banks transforming user expectations. The transparency provided by the CMA’s suggestions will take this to a whole new level and start commoditizing these services,” he concluded.