Greater Competition in Small Business Banking Could Save Firms £1bn
Competition and Markets Authority has set out proposals to reform retail banking and encourage small enterprises to "shop around"
Smaller enterprises could save up to £1bn over the next five years thanks to proposals announced today by the Competition and Markets Authority (CMA) which look to increase competition in retail banking.
Among the proposals suggested was the development of new online comparison tools, new measures targeted at unarranged overdrafts and an improved current account switch service (CASS) to make switching banks more straightforward.
The CMA highlighted statistics that show over 90% of small enterprises use the same bank for their current account and business loans with 60% staying with the same financial institution for over 10 years.
On the back of these figures, the CMA has said it plans to make it easier for businesses to shop around for a current account with the aim to reduce business owners’ “reliance on their personal bank when choosing a bank for their business”.
It has also proposed the introduction of an Open API banking standard so that small business and personal customers can share their transaction history with other banks and third parties – customers can then get comparisons tailored to them.
Anil Stocker, co-founder and CEO of MarketInvoice, said:
“Small business banking has been an oligopolistic market for many years, but these proposals by the CMA finally lay the groundwork for a level playing field in small business finance.
“By increasing cost transparency on business current accounts and overdrafts, so often an effortless source of income for the banks, business owners will finally be able to see exactly what they’ll be charged in advance, and shop around for the best deal.”