With PSD2 just around the corner, the financial services sector in Europe could be on the brink of a new era of choice for consumers and competition between providers.
In the UK – which has been one of the markets taking the lead in the drive towards open banking – the Financial Conduct Authority (FCA) has made proposals for banks to publish key pieces of information about their services.
Is this emphasis on transparency a sign of things to come in the industry?
Good for banks and consumers?
The FCA claims that its proposed measures will be beneficial not only for users of banking services, but for providers, too. Consumers will have more data to compare rival banks, while financial institutions will be better informed when it comes to evaluating their own services against those offered by rivals.
Under the plans, firms that provide personal and business current accounts will be required to publish key pieces of service information, including:
- How long it takes to open an account and have key features working.
- How long it takes to replace a lost, stolen or deactivated debit card.
- How long it takes to give someone account access under power of attorney.
- How and when customers can complete transactions such as making payments or cancelling checks, and whether 24-hour help is available.
- The number and type of major operational or security incidents.
The FCA said this is one component of a broader program of actions in the UK’s retail banking sector, based on recommendations made by the Competition and Markets Authority (CMA) in its 2016 market investigation. The CMA also made proposals relating to improved transparency for overdraft users, competition in the small business banking market and the delivery of an open banking solution that benefits consumers.
Christopher Woolard, executive director of strategy and competition at the FCA, said the regulator wants to challenge the perception that “all banks are the same”.
He added: “We know from our consumer research and the CMA’s report that consumers and small businesses are really interested to know about the service their bank or building society offers compared to other firms. These proposals represent a step forward, making it easier for consumers to judge whether their bank is offering good service and for firms to see if they are competing effectively against other providers.”
Still a long way to go?
With PSD2 requirements for opening up access to banking services becoming mandatory in the EU in January 2018 and general market drivers in other countries, the industry is witnessing some big strides towards open banking. Furthermore, the fintech and ‘challenger bank’ sectors are giving consumers more choice than ever before.
These factors would seem to suggest that the industry has entered a new phase of openness and healthy competition. However, in the UK at least, there are ongoing concerns about how easy and attractive it is for consumers to switch banks.
One year on from the publication of the CMA’s retail banking market investigation, TSB released figures indicating that the number of people changing bank accounts has fallen by 14 percent in the past 12 months. The bank estimated that consumers are missing out on a collective £10 million in savings by staying with their existing provider.
TSB called for three key measures which it believes will put consumers “back in control of their banking”. These are:
- A requirement for banks to provide a ‘monthly bill’ so customers know exactly how much they are paying for their banking.
- The creation of a dedicated solution so all consumers can change their bank account, particularly those who stand to benefit the most, such as overdraft users.
- An obligation on all banks to promote the Current Account Switching Service and explain to customers how easily they can switch.
The introduction of PSD2 and other key developments over the coming years will provide an insight into the willingness of consumers to embrace choice and diversity in financial services. Or is it possible that the reported problem of people being more likely to get divorced than switch banks will persist for some years yet?
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