Today’s final order formally implements these reforms and sets out the strict timetable for introducing key advances such as open banking, the monthly maximum unarranged overdraft charge, standardised business current account opening procedures, and banks having to publish service quality statistics.
Alasdair Smith, Chairman of the retail banking investigation, said “Open Banking will make a transformational change to banking for personal customers and small businesses. For the first time innovative and secure apps will provide personalised services and information to cover all financial needs in one place, and make it easy for people to find out what bank account is best for them.
We’re also making banks send alerts to people about to slip into overdraft to help them try and avoid unnecessary charges. Banks receive £1.2 billion a year from unarranged overdraft charges. A new alert system, combined with our order to require them to publically announce their maximum monthly charges, should mean significant savings in future for their hard-pressed customers.
The CMA has already accepted undertakings from Bacs to make ‘ditching and switching’ easier. It has committed to improve the Current Account Switch Service within a year by extending the time the automatic redirect service is available when they switch banks, actively provide information to those people who would benefit most from changing bank and introduce independence into governance of the switching system.
Small businesses will also benefit from the Open Up Challenge run by innovation charity Nesta, which will enable the development and delivery of comparison and advice services, and the CMA implementing measures that will increase the transparency of cost and eligibility of SME lending.
The Financial Conduct Authority will take action in response to the CMA recommendations which will include supporting the work on open banking, testing prompts designed to increase consumer engagement and alerts that increase customers’ awareness of their overdraft usage, publishing service quality information and reviewing the effectiveness of banks’ introduction of a monthly maximum charge for unarranged overdrafts.
Key dates in the implementation of the banking revolution include the launch of the Open Up Challenge run by Nesta later this month, the first stage of the Open Banking data release in March and a maximum monthly charge on unarranged overdrafts coming into force in August.