Posted: 30th August 2016

The CMA’s newest report attempts to bring a greater level of technological innovation and competition to the banking sector, encourage better engagement from consumers over the suitability of their current accounts and make it easier for them to compare and switch. 

In producing the report, the CMA has had to balance the needs of larger established players and newer challenger banks to propose solutions that work for customers. Whether the proposals provide a level playing field for all banks will be pivotal to the success of the CMA’s ‘Making banks work harder for you’.

So how will this latest paper land with challenger banks, and how should those firms be viewing the new proposals in terms of opportunity?


What is it?

Centralising consumers’ data in order for them to share it securely between banks using a central banking API – this will make consumers’ management of their accounts more straightforward and allow them to “find and access better value services and enable them to take more control of their finances” (CMA, 9th August 2016). Specifically, it will mean easier overdraft and cash flow management and the ability to compare products when switching.

As well as this, the CMA note that “many personal customers, in particular overdraft users, could make significant savings by switching to a different current account”.

Opportunities for challenger banks

The flexible, technology-based business models of many newer challengers means that they are in a great position to act nimbly and gain more consumer exposure under an open banking regime. Many of the business models have been set up to engage with customers through online channels. A central banking API will provide a platform for the wider exposure of challengers’ innovative products.

Thoughts for firms

  • It is crucial that challengers’ products and processes deliver the right outcomes in a compliant and customer-focused way.  This could be the key factor in a challenger firms’ aspirations to compete with the larger banks 
  • Approximately 3% of consumers switch their current accounts every year – although this number continues to increase and many players are winning market share through focusing on customers that are switching. Under open banking this is likely to increase considerably, so are products and processes set up for a potential influx of new customers? 
  • Are your charging structures overly complex? Ensuring your customers can easily interact with their products and your firm will be more important than ever; with more control in the hands of consumers, it will be the products which are easiest for consumers to manage that will rise to the top 
  • If open banking is promoted effectively by regulators and legislators, firms can expect to see a step change in how financial products are spoken about – look for opportunities to convert the language around products from internally-facing to externally-facing (if necessary)


What is it?

As part of the open banking directive, the service quality of banks will be made transparent, allowing consumers to assess the experiences of others and make more appropriate choices.

This has the potential to create a ‘virtuous cycle’ of proactive, customer-centric work feeding into customer outcomes, which in turn could lead to customer advocacy and increase firms’ competitiveness.

Opportunities for challenger banks

There is ample opportunity for challengers in this space. Business Banking Insight (BBI) research carried out in September and November 2015 showed small businesses rated their service satisfaction with their large bank at 60%. In the retail market, Which? consumer satisfaction research shows a host of challengers at the top of the list in multiple categories.

Thoughts for firms

  • Have you benchmarked yourself against your competitors as effectively as possible? Having clear sight of how you are currently performing will help ensure you are competitive in all the areas of service quality that are assessed
  • With a shift towards this type of transparency, the quality of many elements of a firm’s service will be clearly signposted to customers and they will be free to choose their preference. Firms who are scoring highly in service quality should be in a great position to hit the ground running here


What is it?

“Personal and business current account relationships are open-ended and do not have regular trigger points (like the annual renewal of insurance policies, for example) when customers might be prompted to ask themselves whether they could be getting a better deal elsewhere on their current account.” (Making banks work harder for you, 9th August 2016)

The CMA wants to see firms engaging customers at pre-agreed intervals to encourage them to think about the advantages of switching. It is seeking to create the same competition around bank accounts as currently exists around other financial services products, and will be researching on the most effective ‘touch points’ for customers, and how frequently these communications will need to be sent. 

Opportunities for challenger banks

Although BCOBs requires firms to prompt their customers annually to ensure their packaged bank account remains appropriate, proposals suggest that it could become more widespread. Embedding the right ‘touch points’ into the customer journey can work in favour of challengers in a world where consumer trust in the industry is low. There will be advocacy on offer to firms engaging effectively with consumers through the appropriate channels – many challengers are already well set up to engage people through digital channels.

Thoughts for firms

  • Are you currently able to engage consumers over multiple channels such as through their online banking or social media? Testing the level of engagement and outcomes provided by these communications can help you to establish whether they are effective
  • Do you segment your customer base using demographic factors? Doing this can enable your firm to respond to the varying needs of potential customers and help you establish the best way to get messages out to all of them
  • Given the point above, do you also retain the flexibility to offer bespoke solutions for customers whose needs don’t align exactly with that of the ‘ideal customer’?
  • Open banking may – as it purports – open up your banking services to a wider market, meaning that firms should review the way they communicate with and treat specific customer segments, such as those who are long or short-term vulnerable and those in arrears – it might be the case that challengers’ customer base changes quite considerably as a result, and communication with customers may have to change, too


Challenger banks can be reasonably happy with the outcomes of this latest CMA work. Some have said the measures do not go far enough, but inevitably, a sea change in an area of financial services that affects almost every consumer in the UK will always be subject to a process of transition.

It’s likely that if embedded effectively, Making banks work harder for you may result in an influx of consumers into the market who historically have avoided engagement with financial services firms – it’s firms who are able to provide simple products at a good price while imparting all the necessary information who will be best placed for future success in this area.

There should be ample opportunity for challenger firms to further increase their market share. Is your firm ready to take advantage of this market upheaval while providing good outcomes for all?

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Huntswood - Insight