Fierce competition in retail banking is driving choice and lowering prices for consumers and small businesses according to the UK financial watchdog.
Digital innovation and changing consumer behaviour is helping to weaken the stranglehold of large banks over the industry according to a report published today by the financial conduct authority (FCA). The FCA revealed that digital challengers upped their share of personal and micro-business current accounts across 2020 and 2021 causing large banks to lose out.
“Competitive pressures and innovation are starting to deliver for retail banking customers, with greater choice, lower prices and more convenient ways to bank,” said Kate Collyer, chief economist for the UK’s financial watchdog.
The regulator credited the adoption of digital innovations by banks and their customers, accelerated by the pandemic, with improving the service quality and satisfaction, particularly for mobile and app-based users.
“But changes that may benefit many of us can also be a risk to those in vulnerable circumstances, which is why we have put in place guidance on the closure of branches and ATMs,” Collyer warned, noting that the FCA is consulting on a new consumer duty to set higher expectations for the standard of care that firms provide.
The FCA noted the benefit to customers from changes to the overdraft market. In 2019 the regulator slashed fees that banks were able to charge for unarranged overdrafts after finding that the fees harmed low income consumers disproportionately.
“Our research clearly shows the impact of the measures we took to reform the overdraft market and protect those financially affected by Covid,” Collyer added, referencing measures put in place by the FCA to support borrowers financially affected by the pandemic.
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