Watchdog demands tech overhaul for banks to promote better competition

The CMA investigation slams banks

A two-year inquiry has pointed out that Britain’s High Street banks need to undergo a technological “revolution” to promote better competition.

The Competition and Markets Authority (CMA) found that new phone-based apps should be introduced by early 2018. These apps should show customers the best account offers to serve their interests.

“The reforms we have announced today will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks,” said Alasdair Smith, chair of the CMA’s retail banking investigation.

“Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.”

In response to the Competition and Market Authority’s (CMA) final report published today, Rishi Khosla, co-founder and CEO of OakNorth Bank, commented: “As expected, the CMA’s report has fallen short and failed to deliver solutions to a number of the key issues it identified, in particular those facing SMEs seeking larger loans.

“The CMA has explicitly stated in its report that a combination of factors make it difficult for new entrants and smaller banks such as OakNorth to effectively compete. Yet despite this, the solutions it’s provided for SME lending are limited to unsecured loans of up to £25,000, so won’t address the issues facing SMEs that need secured or larger loans.

“The fact that the CMA is simply going to pass the buck to the Treasury who won’t look to launch their own investigation until two years from now is extremely disappointing. There are millions of SMEs that are struggling to secure growth capital who may now need to wait up to four years for the situation to improve.

“This is exactly the same approach the CMA took following its investigation into the competitive impact of replacing the Bank Levy with the Corporation Tax Surcharge. Instead of getting on the front foot and trying to address the competitive issues with larger SME loans now, it is choosing to wait and see if the benefits from its proposed remedies for other products will have a ripple effect.

“The CMA should work with the Treasury and the regulators (PRA and FCA) to create a more favourable regulatory environment for new entrants such as OakNorth. Unlike large banks, we do not pose a systemic risk so should not have to adhere to the same capital and regulatory requirements as them. The Corporation Tax Surcharge should be removed for smaller banks as this will genuinely move competition in the right direction and create the ‘revolution’ in banking the CMA claims we’ve already had.”