The long-awaited final recommendations from the Competition and Markets Authority (CMA) on changes to the retail banking sector are a promising step for small businesses and should be swiftly put into action.
From the outset of this 21 month investigation, the Federation of Small Businesses (FSB) called for a set of remedies that would empower small firms, and lead to increased switching and greater competition across the market.
Over this time, FSB has become increasingly concerned by the dramatic increase in pace of bank branch closures, which we believe is undermining competition in the market. We are pleased the CMA has backed our calls for further support for affected small businesses, partly through bank generated prompts and alerts.
The CMA has also agreed with FSB recommendations to standardise the information and evidence needed to open a Business Current Account (BCA) and make sure banks produce good guidance to small business customers about them. This will remove some of the burden for small businesses of opening a BCA, as well as making it easier to compare banks and switch more easily to get a better banking deal.
FSB also supports the CMA’s proposals for online banking comparison tools, but warns that safeguarding customer data must be an absolute priority. The CMA has decided to support Nesta’s ‘challenge prize’ and FSB believes Business Banking Insight (BBI), the most comprehensive small business banking resource of its kind, will have a crucial role to play in its development going forward.
FSB will continue to highlight the challenges faced by our members around banking and access to finance. We have already engaged with the CMA and new Economic Secretary to the Treasury Simon Kirby MP, and look forward to working with both.
Mike Cherry, FSB National Chairman, said:
“Today’s banking market does not work well for small businesses. The CMA’s recommendations will help to create a more customer focussed retail banking market by tackling some of the challenges small firms face.
FSB is deeply concerned about the worrying pace of branch closures and the impact this is having on some small businesses’ ability to make informed banking decisions, particularly in rural areas.
Unfortunately, 2016 is already looking like a record-breaking year for closures. We are pleased the CMA has taken forward our recommendations of greater communication and support to affected small business customers, but we now want Ministers to look at further options to protect small businesses’ access to their local bank.
We welcome the package of measures aimed at improving the Current Account Switching Service (CASS) and reassuring small businesses it is a quick, easy and safe way to switch accounts. Current levels of switching among small firms are far too low, with only four per cent of FSB members switching in the last year. We look forward to continuing to work with all organisations to raise awareness of CASS across the small business community.”