What the banks have to say about the wave-making CMA investigation

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As we’ve already looked at in in a previous feature – Unpacking the banking competition watchdog’s groundbreaking new report – the Competition and Markets Authority has published its much-anticipated report on the banking sector.

Contained within it are calls to make it easier for retail and business customers to switch banks, the introduction of “trigger points” such as prompts on branch closures or product changes and plans for customers to access multiple finance arrangements through one app.

But what do banks actually make of the report? We found out the opinion of the high street banks and the new kids on the block – challenger banks.

The incumbents:

A Lloyds spokesperson said: “The CMA measures published today reflect the fast-changing demands of businesses and consumers. he remedies will speed up innovation and deliver benefits which, although costly to implement, will bring fundamental change to the retail banking market.

“We already compete hard in personal and business banking and these measures will make it easier for customers to understand the costs and benefits of their accounts, shop around and switch.”

A Barclays spokesperson said: “The remedies within the CMA report are substantial and comprehensive, with considerable potential to transform the market. Open APIs will enhance customer experience and competition, building on a strong track record of banking innovation in the UK.

“It is critical that protecting customer interests is at the heart of the data sharing agenda. We are supportive of measures to help consumers and SMEs make informed decisions about their banking needs. We continue to champion transparent products and timely alerts to help customers manage their money.”

An HSBC spokesperson said: “The CMA’s remedies focus on various ways to enhance personal and business customers’ choice of banking products, reflecting a number of initiatives already implemented by HSBC. These include a grace period to help customers avoid a fee on un-arranged overdrafts and a cap on monthly un-arranged overdraft fees.”

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The challengers:

Ian Walters, MD for business and private banking at Metro Bank, said:“SMEs are the most underserved community in UK banking and we are disappointed that the CMA’s findings do not attempt to level the playing field for new entrants and challenger banks, by recommending that the PRA looks into disproportionate capital requirements. Disproportionate capital requirements are anti-competitive and unduly support the large incumbent banks by allowing them to hold up to ten times less capital for the same loans than challenger banks. 

“The CMA was given a rare opportunity to fundamentally support and develop competition in banking, it is disappointing that they decided not to get at the root of the problem, but rather they missed the point and tinkered around the edges.”

Phillip Monks, CEO of Aldermore, said: “Two years in the making and following numerous other reports into banking competition, I’m left with the feeling that the CMA has missed a huge opportunity to provide a real, positive economic impact.

“We would have liked the CMA to have gone further faster to improve genuine competition in the market, particularly around capital requirements. The disadvantages faced by challenger banks in respect of disproportionate capital requirements relative to the largest banks remain a major issue for banking competition. This issue has been recognised repeatedly by the CMA and so it is very surprising that the organisation responsible for competition is not pushing for definitive action in this key area.”

Rishi Khosla, co-founder and CEO of OakNorth Bank, said: “As expected, the CMA’s report has fallen short and failed to deliver solutions to a number of the key issues it identified, in particular those facing SMEs seeking larger loans.

“The CMA has explicitly stated in its report that a combination of factors make it difficult for new entrants and smaller banks such as OakNorth to effectively compete. Yet despite this, the solutions it’s provided for SME lending are limited to unsecured loans of up to £25,000, so won’t address the issues facing SMEs that need secured or larger loans.

“The fact that the CMA is simply going to pass the buck to the Treasury who won’t look to launch their own investigation until two years from now is extremely disappointing. There are millions of SMEs that are struggling to secure growth capital who may now need to wait up to four years for the situation to improve.

A Handelsbanken spokesperson said: ”We see all the time just how much customers of all kinds care about the service they receive from their bank. But for SMEs in particular, access to everyday financial support from a team that knows you and your business, and understands the wider market conditions, can prove critical to business success. The recently launched Business Banking Insight survey is one example of how small businesses can be helped to find a suitable partner by researching how other SMEs rate their banks’ service quality.”

Mondo’s deputy CEO Paul Rippon said: ”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.

“One recommendation from the report is that banks should be required to send alerts to their customers when they go into an un-arranged overdraft, either by text message or mobile push notification.

“At Mondo we’ve been sending these kinds of alerts since launching our Alpha programme in 2015. We’re now using push notifications to inform almost 30,000 people on our Beta of their balance, or if they need to top up their account.
The central reform recommended by the report, an “Open Banking programme”, could, if implemented, transform the way consumers compare banking products.

“At Mondo we launched our API with our Beta programme, back in February. We hope that the banks will follow our lead by publishing their own open APIs in the near future.”

From Metro Bank to Mondo: A look at the prospects of Britain's challenger banks

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