Reform of retail banking

Print publication


The Competition & Markets Authority (CMA)’s final report following its investigation into the retail banking market was published on 9 August 2016 and can be accessed here.  The report concludes that the larger and more established banks do not have to compete hard enough for customers’ business.  As a result, smaller and newer banks find it difficult to grow and customers do not benefit as they should in a more competitive market.

The CMA is therefore implementing a wide package of reforms which aims to ensure that customers benefit from technological advances and increased competition. Key measures, which should benefit personal and small business customers, include:

  • The requirement for banks to operate Open Banking by 2018. Open Banking requires the implementation of technological change to enable customers to share their data securely with other banks and third parties, to take control of their funds and to compare financial services products more effectively.
  • The requirement for banks to publish trustworthy and objective information on the quality of their services to encourage customers’ easy and effective comparison with competitors.
  • The requirement for banks to issue periodic and event-based [1] prompts reminding customers to review the service they are getting and to consider switching banks.
  • Measures to make it easier for customers to search and switch bank accounts and other financial services products.
  • Measures to benefit unarranged overdraft users, including increased notification requirements to give customers the increased opportunity to avoid overdraft charges and monthly caps on such charges.

WM Comment

The remedies proposed by the CMA are influenced by insights from behavioural economics, which are essentially aimed at equipping the consumer with the tools to take action. This approach reflects the recent trend for economic regulators to put a stronger focus on behavioural economics and move away from structural remedies.

Whilst there seems little doubt that the CMA’s retail banking reforms will place an additional administrative burden on all lenders in the short term, most lenders’ policies and practices already go a long way towards promoting transparency and treating customers fairly. Harnessing technological advances to improve the customer experience and to encourage competition is perhaps a natural extension of this.  Some of the more established banks will already be well equipped to respond positively to the new measures (as, no doubt, will their customer base) and some of the smaller and more recent entrants to the market will welcome the opportunities that the reforms may represent.

If you would like any further advice in connection with the CMA’s final report and what it might mean for your business – in particular, if you would like any help with reviewing your existing policies and procedures to ensure compliance or if you currently face any customer complaints with which we might assist – please do not hesitate to contact Louise Power or any member of the Banking Litigation team.


[1] Relevant events will include branch closures, fee/charge increases and the like.