OFT Calls For Major Change In Current Account Market

A review of the personal current account (PCA) market has concluded that further significant changes are still required to tackle longstanding competition concerns and a lack of focus on customers’ needs, is the statement made by the UK’s Office of Fair Trading.

The OFT has published a review of the £9 billion market as part of its ongoing programme of work on retail banking. It found that since the OFT last looked at current accounts in 2008, the major banks have increased their share of the market, entry by new competitors remains infrequent and consumers still only rarely switch to an alternative provider. 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.

Clive Maxwell, OFT Chief Executive, said: “Personal current accounts are critical to the efficient functioning of the UK economy. Despite some improvements, this market is still not serving consumers as well as it should. Customers still find it difficult to assess which account offers the best deal and lack confidence that they can switch accounts easily. This prevents them from driving effective competition between providers.”

The OFT is also making additional new recommendations, building on its previous initiatives, to make PCA costs more transparent, the switching process more reliable and improve the way in which unarranged overdrafts are provided. It is calling on banks and building societies to make rapid progress in implementing these recommendations, as well as being more proactive in ensuring that their products and services are better aligned with the needs of their customers.

The OFT believes that these changes have the potential to have a positive impact on competition in the market and as a result, it has provisionally decided not to make a Market Investigation Reference to the Competition Commission. It plans to revisit the question by 2015, in line with a recommendation by the Independent Commission on Banking. Maxwell continued, “The retail banking sector needs to become more competitive and customer-focused to ensure that further action by the competition authorities is not required.”