The UK’s Competition and Markets Authority (CMA) has today published its provisional findings as part of an in-depth investigation into the £16 billion current account and business banking sectors.

The CMA found that low levels of customer switching mean that banks are not put under enough competitive pressure, and new products and new banks do not attract customers quickly enough. It has suggested a range of remedies to prompt customers to review their service, help them compare products and enhance the existing current account switching service. The CMA intends to trial some of these remedies to ensure they are really effective. This is the first time the CMA will conduct behavioural trials, and follows the increased use of behavioural economics to test remedies by the Financial Conduct Authority.

The CMA has also reached provisional findings in a number of areas that change long-held views from previous investigations by the Office of Fair Trading and Independent Commission on Banking. The CMA finds that:

• the UK has one of the highest rates of mobile banking adoption in the world and there is significant continued technical innovation;
• branches are not a pre-requisite for entry or expansion, in an increasingly multichannel environment;
• the free-if-in-credit pricing model is popular and gives a reasonable deal to customers; and
• the evidence does not suggest that banks are making excess profits.

The CMA also found that structural remedies, price controls and account number portability would either not address the problems it has identified or would be disproportionate.

Frontier advises Lloyds Banking Group on the CMA’s investigation. Frontier’s submission to the CMA on using behavioural economics to improve customer research can be found here.

For more information, please contact Goran Serdarevic on g.serdarevic@frontier-economics.com, or call +44 (0)20 7031 7000.