UK: Underdogs want end of free bank accounts

The UK’s Competition and Markets Authority confirmed last week that it has launched an in-depth investigation into the banking sector as it explores how to boost competition in the industry. But while the so-called Big Four banking giants are resisting change, two smaller competitors are voicing their own ideas on how to level the playing field.

According to reports, Tesco Bank and Virgin Money are calling for an end to free bank accounts and a requirement for the four leading lenders to introduce monthly fees for current accounts.

Reports say the CMA will examine how banks charge for their services as part of its investigation; Tesco and Virgin were the only two banks that called for the introduction of such fees.

Reports say any decision to require such fees will likely be unpopular among consumers.

Reports say Lloyds Banking Group has told the CMA that free accounts actually encourage competition, allowing consumers to have several accounts at competing banks at one time without being charged.

Tesco disagrees, arguing that the free accounts create “a barrier to entry which is very difficult for new entrants not to conform to in order to compete.”

Virgin agreed, arguing that free accounts result in a lack of charging transparency, because banks make up for the lack of fees through overdraft charges. That misleading label of free banking, Virgin argues, “makes it difficult for consumers to shop around or compare products.”

The UK’s banking industry is dominated by RBS, Lloyds, HSBC and Barclays; the CMA is now i investigating whether those banks have partaken in any anticompetitive conduct through their dominant positions, and will explore how to inject more competition in the industry.

Full content: This Is Money

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