TSB lambasts competition watchdog for failing to fix "broken" banking market

TSB lambasts competition watchdog for failing to fix "broken" banking market

TSB has called on the Competition and Markets Authority to fix the UK's "broken banking market" by making it easier to switch bank accounts.

The UK bank says the watchdog's nearly three year long investigation into competition in retail banking seems to have "backfired", with fewer consumers switching banks than before it intervened.

In the past 12 months since the publication of the CMA's final report, the number of people using the Current Account Switching Service (Cass) has fallen by 14%.

Research undertaken by TSB indicates that only 28% of people have heard of Cass, directly contradicting the 75% customer awareness figure which CASS recently trumpeted.

"The CMA’s attempt to fix the industry and get consumers a better deal has failed and banking is still not working in the interest of consumers," says TSB. "The big banks continue to have a stranglehold on the market - they are taking customers for granted, trapping them on poor deals and making it impossible to switch."

Nor does the bank hold out much hope for a shake-up in the market from the introduction of open APIs, accusing the incumbents of dragging their feet and pointing to its own research which shows that only two percent of people have heard of the concept.

The bank is calling on the CMA to toughen its stance, urging the authority to enforce the introduction of monthly bills, showing the true cost of consumer banking services, and 'credit passports' which customers can take to their new bank to ease the pain of making a switch.

“The CMA had a golden opportunity to fix the industry, by enabling consumers to make informed choices about their banking and ultimately putting them in control. But one year on and its attempt to get consumers a better deal has failed," says TSB chief Paul Pester. “In a truly competitive market, consumers will be offered genuine choice and a level of transparency they’ve never seen before, so they can make informed choices and switch with ease. Only then will consumers be empowered to vote with their feet and get a better deal."

Comments: (3)

A Finextra member
A Finextra member 10 August, 2017, 12:00Be the first to give this comment the thumbs up 0 likes

Is there really any competition in the Banking Market?  As a responsible consumer with low levels of debt and more of an interest in saving, I'm unable to find ANY bank willing to offer me a half decent interest rate on my savings. 

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 11 August, 2017, 07:421 like 1 like

Take a typical English Breakfast in a 5 star hotel in London: The cost of ingredients is less than 50p. The selling price is around GBP 25. How come the price is so high when the cost is so low? Is there really any competition in the Hospitality market?

There are more such examples in my blog posts entitled Competition Keeps Prices In Check — But Not Necessarily Low and The Tug-of-War Between Different Pricing Models (hyperlink removed to comply with Finextra Community Rules but this post should appear on top of Google Search results when searched by its title).

If someone believes there's competiton in Hospitality, Telecom, etc., then they can't deny that there's competition in Banking. 

IMO, the real problem is the average consumer expects too much out of competition. While competition can keep prices in a certain band, it can't keep prices low. Ergo, while competition is keeping interest rates of all banks in a certain band, it can't ensure that interest rates are high enough by consumer's reckoning.

A Finextra member
A Finextra member 11 August, 2017, 13:17Be the first to give this comment the thumbs up 0 likes

Maybe TSB would have more switchers in (and less out) if:

A) They had a differentiated product and / or service

B) They hadn't ended their £130 switching incentive

Why don't TSB tell us how their customers are better served than the competition, rather than attack a process that the majority are ignorant of according to TSB's research?

Finally, awareness of CASS is completely different to ease of switching.  CASS is already very simple to use.  Would making it even easier drive demand?