Banks are still not doing enough to put customers first, according to the Office of Fair Trading (OFT) as it calls for significant changes to tackle longstanding competition concerns surrounding current accounts.
The OFT has published a review of the £9bn current account market today as part of its ongoing work on retail banking.
It found that while major banks have increased their share of the market, entry by new competitors remains infrequent and consumers still rarely switch to an alternative provider.
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Bank accounts review: the findings
The OFT believes there have been some specific improvements since it last reviewed the market five years ago.
In particular, it estimates that people have saved up to £928m a year from the fall in unauthorised overdraft charges between 2007 and 2011, although it believes overdraft charging structures remain too complex.
The OFT found that, despite improvements, comparing the costs of current accounts continues to be challenging and that people lack confidence in the switching process.
Overall, a combination of a lack of competition, low levels 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.
However, a number of major developments in the coming months – including the sale of branches from both Lloyds Banking Group and the Royal Bank of Scotland, and a new automated account switching service – are expected to help make it easier for customers to compare products and services.
Despite that, the OFT has called on banks and building societies to make personal current account costs more transparent and the switching process more reliable, and to improve the way in which unarranged overdrafts are provided.
Bank accounts review shows we need Big Change
In response to the OFT’s review into current accounts, Which? executive director Richard Lloyd said: ‘This is the latest damning verdict on how badly people are still being let down by the banking industry.
‘Everyone – consumers, the Government, leading bankers and now the OFT – seems to agree that big change is needed in banking, and that much greater competition on the high street is urgently needed to make the banks work for customers, not bankers.’
Richard Lloyd said if the reforms underway do not make a real difference to consumers quickly, the whole of retail banking must be referred to the Competition Commission without delay.
He added: ‘The need for further action by the competition authorities seems inevitable while the Government’s plans for reform fail to adequately address the unhealthy dominance of the biggest banks, barriers remain to new providers thriving in the market and the industry refuses to make switching banks easier by introducing portable account numbers.
‘The measures proposed today by the OFT are a step forward but, by themselves, will not do what’s required to transform customer service and stop banks offering poor value products that are impossible to compare.’
How to switch bank account
If you’re fed up with poor service or rates from your bank, follow our five-step guide to switching bank account.
That guide also answers any questions you might have about the switching process.