Commenting on the Competition and Markets Authority’s (CMA’s) retail banking market investigation report, Ewen Fleming, partner and financial services group practice leader at Grant Thornton UK LLP, said:
"Whilst consumers will largely welcome the CMA's proposed measures, their overall impact will, to a large degree, be dependent on the technology deployed being game-changing. There’s a balance that will need to be struck between innovation and consistency across the industry, which could prove challenging. The terms of access to the proposed new digital app will become critical.
"Interestingly, the CMA seems to group all retail customers together and all business customers the same, when we know the market is a lot more segmented. There's a risk that the more sophisticated, digitally-savvy customers in each group will benefit and others might not see the same results.
"Related to this is the reliance on disclosure as a tool to encourage competition. It's unclear whether this will work as well as the CMA seems to believe, or that the products are sufficiently differentiated for anything beyond simple 'best buy' tables to make a significant difference. What's also unclear is what the measures to support smaller banks are, beyond being able to target very specific groups of customers.
"For the measures to have a significant, material impact on the market, a lot will be required of the big banks in terms of investment. This comes at a time when they are also looking to update their legacy systems and an uncertain post-EU referendum and low interest rate environment is potentially reducing their profitability.
"Positively, the overdraft proposals look useful, but may not go far enough to help those in real need.
"Whilst any measures to increase consumer's control over their finances and increase competition in the sector should be encouraged, the costs and resource implications on institutions to deploy the technology and controls to ensure they are market-appropriate need to be taken into consideration – particularly at a time of limited growth potential in the sector."