Further to its market study on personal current accounts ("PCAs") in July 2008, the Office of Fair Trading ("OFT") has been working with the banking sector to address certain problems preventing the PCA market from working well for consumers.
It is currently estimated that there are nearly 71 million PCAs in the UK, providing a total yearly revenue of around £9 billion. The OFT notes that, following recent mergers in the sector, the PCA market has become increasingly concentrated and is now close to being classed as 'highly concentrated'. This position is however expected to change in the coming years due to divestments by RBS and Lloyds Banking Group and new entries such as Metro Bank.
The OFT's main concerns centre on the following key issues:
- problems with switching PCA providers;
- low levels of transparency of PCA charges and other costs; and
- complexity and lack of control over the use of unarranged overdrafts.
In relation to problems with switching, initiatives were agreed in October 2009 with Bacs, the payments processor, to improve the process of switching bank accounts and to increase consumers' confidence in the switching process. Early evidence suggests that the process is improving - although there were fewer reports of switching in 2010 than in 2007, the proportion of switchers experiencing problems declined from 32% in 2007 to 8% in 2010.
On transparency, the major PCA providers in Great Britain voluntarily agreed in October 2009 to implement a number of initiatives to make the costs of PCAs more transparent. By the end of June 2010, the major PCA providers in Great Britain, as well a number of other providers, had published illustrative charging scenarios on their websites. The OFT is however strongly encouraging all banks to make these scenarios as easy to find as possible.
Despite announcing good progress in relation to unarranged overdrafts in March 2010 (see Community Week issue 463), the OFT has since noted that progress is not consistent across all providers and that there is room for further improvement in this respect.
Unless further immediate action appears appropriate, the OFT expects to review the market again around 2012. In the interim the OFT will continue to closely monitor the PCA market and publish six-monthly updates (with the next update due in March 2011).
Separately the OFT is reviewing barriers to entry and expansion in the UK retail banking sector and a report is expected in autumn 2010
To view Community Week, Issue 491; 1st October 2010 in full, Click here
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