The provisional recommendations from the Competition and Markets Authority (CMA) on changes to the retail banking sector should help small businesses. Members at the Federation of Small Businesses (FSB) called for a set of remedies that would demonstrably change consumer behaviour, with increased switching and more competition making high street banks improve. Structural change was not on the cards in this CMA report. However, it does propose changes to make it easier for small businesses to compare banks and switch more easily to get a better banking deal.
Mike Cherry, FSB National Chairman, said:
“Today’s banking market does not work well for small business. We welcome the package of measures aimed at boosting awareness of the Current Account Switching Service (CASS). Current levels of switching among small firms are far too low, with only 4 per cent of FSB members switching in the last year. Small business owners are still not confident that switching banking products or services will be a risk-free, seamless process, and as a result, many choose not switch. A new awareness campaign and measures to make switching transparent are promising steps.”
We agree with the CMA’s view that better transparency around prices, charges and availability of lending products will make it easier for small business customers to shop around. The proposals’ focus on a new online comparison tool should help businesses feel more confident when trying to find the bank that best suits their needs.
FSB believes Business Banking Insight (BBI), the most comprehensive small business banking resource of its kind, is a valuable service for small firms, with a new and improved website due to be launched this summer. If the CMA decides to support Nesta’s ‘challenge prize’ in its final report, it must be careful to ensure any subsequent development of new comparison services does not complicate or confuse the advice process for small firms.
Mike Cherry continued:
“The CMA has tackled some of the more opaque practices of the high street banks. With £1.2bn charged each year for unauthorised overdrafts, proposals for a maximum fee cap and to introduce prompts and alerts for overdrafts at the end of free banking periods will combat a particularly poor practice that small firms face. This should encourage small businesses to shop around and switch.”
The CMA has also considered how innovation can help increase competition between banks. An open API banking standard will allow business customers to safely share their transaction history with other banks, helping to provide greater choice and empowering our members to switch. FSB will work with the CMA ahead of the publication of its final recommendations in August.