Britain’s biggest banks appear to have escaped being broken up by the competition watchdog which is due to publish the provisional results of an 18-month investigation into the sector on Thursday.
The Competition and Markets Authority is also expected to step back from ending free banking and instead tell banks to make it easier for customers to switch their bank accounts.
According to reports, the CMA will publish data showing that current account customers will be on average £70 a year better off by switching their accounts to another provider. Customers who use their overdrafts regularly could be £260 a year better off.
The preliminary findings are being closely watched by the big four – Lloyds Banking Group, Royal Bank of Scotland, HSBC and Barclays – which together control 77% of the personal current account market. That dominance is little changed despite 10 competition investigations in the last 15 or so years.
The CMA has also scrutinised the small business market where the big four have an 85% share of accounts and 90% of loans. In an update a year ago, the CMA pointed out that there has only been one entrant into business banking – Metro Bank – in recent years even though satisfaction rates remain low among customers.
The competition watchdog has faced calls from so-called challenger banks – the likes of Virgin Money – to end free banking because it makes it difficult for customers to know how much they are actually paying for their current accounts. RBS, which is 73% owned by the taxpayer, had also suggested that free banking could be a problem. It told the CMA that there could be more innovation in the market if free banking ended.
However, the CMA is reportedy focusing instead on ways to give customers more information about their current accounts. One way is through Midata which allows individuals to receive information about themselves.
Lloyds, which has a 25% share of current accounts, has shown the CMA a prototype price comparison system for current accounts, in the same way that customers can compare insurance products.
The CMA intends to require banks to encourage customers to look at alternative providers when branches close, according to reports.
Small business banking customers – who often find it difficult to move their accounts because of overdrafts and loans – may also be offered a switching and comparison services.
On Wednesday night the CMA would not comment on its investigation, which is scheduled to produce its final report by next May.
The banking industry attempted to head off the investigation in 2013 by setting up a seven-day switching service intended to take away the concern that direct debits another regular payments would get lost when accounts were moved. Even so, only 3% of current account customers – there are an estimated 65m active accounts – are switched each year.
