The latest report from the CMA (competition & Market Authority) runs over the competition in retail banking, as well as provisions for SME’s. The 405 pages run over the problems being caused and also proposals on how to make positive changes.
The figures we have seen show that 60% of personal customers have stayed with the same bank for over 10 years and over 90% of SME’s get their business loans from their current personal provider. So the figures show that people tend to stay where they are and won’t switch. Why is this? Well, because competitive pressures are weak, the banks have no need to work hard on staying competitive on prices and service. So really, there is no need for a switch as the rates and service are pretty much similar across the market.
What the CMA has considered and what we at Business Agent endorse is more transparency when it comes to fees and charges. The consideration to break up the larger banks would be great if customers understood exactly what they were getting, with no hidden cost, and they could make a much more informative choice between smaller banks.
At Business Agent, we are disappointed in the lack of exposure on alternative finance the CMA has given. The problem with the banks is that they tend to all be very similar and act in the same way. They are huge corporate businesses that have too many customers to handle. Of course they have no incentive to please them. Rather than trying to fix a problem that has been going on for years and years, why not simply show people the alternative. If the CMA believes customers should be provided with the right information, they should also be transparent on customer’s options. P2P lenders and crowdfunding platforms tend to look out for customers more, offer incentives and a competitive edge to attract new customers. Banks have no need to do this because people aren’t aware that there are other options out there so they just grit their teeth and bear through the struggle.
I highly agree with what the CMA has said in regards to capping unplanned overdraft charges and scrapping FIIC products. Banks have had an easy run for far too long, drawing in as much cash as they can and doing nothing to improve their service. They haven’t had to work hard to attract customers or new businesses but, times are changing. Alternative finance is growing rapidly and although the majority of SME’s stick with their current account providers, more and more people are becoming aware of different options. Alternative finance lenders can offer overdraft facilities through business loans, invoice financing to help new business keep a healthy cash flow and many other services. Of course we want to see more competition between banks and them offering informative and incentivised products, but where they can’t’ and haven’t provided alternative finance can and is!
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