With the publication of the CMA’s final retail banking investigation order, the retail banking revolution has just come a step closer, but will the challengers be included? While most of the order appears to be sound, there are some areas for concern:
Challengers will be excluded from service rankings - New challengers won’t be able to participate in standard service scores. The CMA stipulates banks needed to have over 150,000 active current accounts in GB or 20,000 active current accounts in Northern Ireland on 31st December 2016. This could protect the incumbents and stifle the smaller challengers who will struggle to appear in comparison engines
Open Banking will be here next January – The CMA mandated delivery for the largest banks in the UK. Given that delivery for challengers isn’t mandated, will they will find capacity to deliver before the PSDII mandated timelines and seize the opportunity presented to them? We have seen a positive response from nimble challengers, but concern from those with scarce discretionary spend and change resources
Small businesses get a better position on comparison websites -There is a big win for small businesses as price comparison engines for current account and loans will be enhanced. This should support the SME community who have been finding it increasingly difficult to source lines of credit. It will also provide an opportunity for challengers to jump to the top of the search rankings with high value propositions
Vulnerable customers will be left unprotected - The CMA has stated that banks must send text alerts to customers on the brink of being charged any overdraft fee. Vulnerable customers could miss out on the protection provided by these text alerts as the CMA order doesn’t mandate them for customers with basic accounts. These customers may not be sent a text alert in the event of fraudulent transactions, or if they have a transaction declined due to a low balance. Smaller challengers will not be obligated to provide this service, however, serving all customers, including those most vulnerable, in this way would be beneficial to all concerned
Open Banking scope could grow – The Open Banking Implementation Entity Trustee can add scope if it thinks it is ‘reasonable’. This is a positive step, as consumers would benefit from many other datasets (e.g. mortgages, loans, insurance, know your customer) being added to Open Banking. This could make some of the banks struggling to deliver the current scope a little nervous. It will put further pressure on challengers with limited discretionary spend and change capacity.
The CMA just brought Open Banking a step closer. Challengers with a modern architecture and change capacity have been presented with a great opportunity to close the gap with incumbents. Those with a cumbersome legacy architecture and limited change capacity will find it even more difficult to keep up.
We're keen to hear your views on this issue - or issues relating to it.Contact us if you have a view on this that you would like to share.