Any lingering hopes that there was light at the end of the tunnel for UK retail banks were dashed last week by Baroness Susan Kramer, a leading light in the House of Lords for banking reform and chair of the retail panel of the Parliamentary Commission on Banking Standards.

At a private dinner for senior figures in the payments industry Baroness Kramer clearly set out her stall that the retail banking and payments markets in the UK were still in need of radical change, and that these changes are imminent.  She was speaking from a personal viewpoint and not signalling the contents of the Commission’s report, due in June, but I believe that her views reflect the consensus at the Commission.

Baroness Kramer pointed out that the Chancellor, George Osborne, has already made it abundantly clear that he wants to shake up retail banking, and the Treasury subsequently issued a consultation document “Opening up UK payments” that sets out its intention to directly regulate the payments industry and potentially force changes in the ownership and operation of payment systems. 

This alone would be a massive set of changes, but she said that more was coming.  She recognised that the new current account switching service being launched this September will be a step in the right direction, but she wasn’t convinced that it will solve the lack of competition in retail banking or address issues around banks being too big to fail.  

She was speaking shortly after the collapse of Project Verde, the sale of over six hundred Lloyds Bank branches to Co-op, and she believes that one of the existing large UK banks may be forcibly broken up as a way of introducing competition and reducing the ‘big bank’ risk.

She went on to say that full account portability was still under active consideration, although it may be some way off (this is a much-discussed idea that we should all be able to move banks and keep our account numbers in the way that we can keep our mobile phone numbers when we switch from one operator to another).  It sounds simple enough but it is a potentially vast undertaking, which she recognised.  She identified some steps along the way, such as a central database of customer details and a central database of payments mandates, which could well become the next wave of industry initiatives after account switching and the mobile payments database are completed.

The overall message to banks could not have been clearer: buckle up, the ride is about to get very bumpy indeed.