Market Watchdog Promises Better Banking for Small Businesses
Banking reforms include legal obligation to provide NESTA with financial backing and support to give small firms more knowledge
The Competition and Markets Authority (CMA) is to introduce new measures to ensure small businesses avail of the best possible banking services, following an in-depth investigation into the sector.
Its report into the retail banking market revealed that older and larger banks are not competing hard enough for customers and, as a result, are forcing customers to lose out on better deals or even new services.
For small businesses in particular, the CMA reported that small firms don’t have access to tools providing comprehensive information about bank charges, service quality and credit availability was cited as an issue.
As a means to resolve this, banks are now legally obliged to provide innovation charity NESTA with financial backing and technical support in order for banking information to be readily available.
Some of the CMA’s other key reforms, of which it’s hoped will benefit small businesses, include:
- A requirement for banks to implement Open Banking by early 2018 and to accelerate technological change in the UK retail banking sector.
- A requirement for banks to publish trustworthy and objective information on the quality of their service on their websites and in branches.
- A requirement for banks to send out suitable periodic and event-based ‘prompts’ to business customers such as on the closure of a local branch or an increase in charges, so customers can review their current financial provider.
- A requirement for banks to alert customers when they are going into an unarranged overdraft.
Alasdair Smith, chair of the retail banking investigation, said:
“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.
“We are breaking down the barriers which have made it too easy for established banks to hold on to their customers. Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.”