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Banks told to tackle current account 'competition concerns'
Office of Fair Trading tells banks that they must align their current accounts with customer needs.
The Office of Fair Trading (OFT) has told banks to focus on customers’ needs after finding that current account charges are still too complex, while there is a lack of competition and innovation.
Following a report of the personal current account market the OFT said ‘significant changes’ are still required by the banks to tackle ‘long-standing competition concerns’ and ‘a lack of focus on customers’ needs’.
Since it last reviewed the £9 billion current account market in 2008, the OFT has found that banks have increased their share of the market, with entry by new competitors infrequent. It also found that customers still only rarely switch accounts to an alternative provider.
There have been some improvements, with customers having saved up to £928 million in unauthorised overdraft charges between 2007 and 2011, according to the OFT, but it said overdraft charging structures remain too complex.
Comparison of current accounts is also a challenge and individuals lack confidence in the switching process.
Overall the OFT found a ‘low level of innovation and customer apathy in the face of unclear costs and a lack of diversity in the choices of current accounts available mean that this market is not working well for consumers or the wider economy’.
In the future the banking sector will change, including the sale of branches of Lloyds and Royal Bank of Scotland, and an automated account switching service will be introduced.
The OFT has said the banking sector should improve on the initiatives already in place and make current account costs more transparent, make the switching process more reliable and improve the way in which unarranged overdrafts are provided.
Overall, banks must ensure ‘their products and services are better aligned with the needs of their customers’.
Although the banks have escaped an investigation by the Competition Commission, the OFT will look at the market again by 2015.
Clive Maxwell, OFT chief executive, said: ‘Personal accounts are critical to the efficient functioning of the UK economy. Despite some improvements, this market is still not serving consumers as well as it should.
‘Customers still find it difficult to assess which account offers the best deal and lack confidence that they can switch accounts easily. This prevents them from driving effective completion between providers.’
He added: ‘There will be major changes to the personal current account market over the coming months. For these changes to improve the effectiveness of competition in this market, banks and building societies need to act now to improve the quality of service and value for money they provide their customers.’
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by Income Investor on Dec 10, 2013 at 07:56