Current account competition will increase
Jan 25, 2013 (Datamonitor via COMTEX) --
The OFT has admitted the recommendations it made to banks in 2008 to improve competition in the UK current account market have been unsuccessful. Despite the OFT's failure, external factors look set to increase competition in the coming years.
Four and a half years since it issued recommendations designed to increase competition, the Office of Fair Trading (OFT) has announced the obvious: market concentration remains high, the entry of new banks is infrequent, and switching rates are too low. Many providers have been slow to implement the recommendations designed to improve transparency and switching, and some providers have failed to do so altogether.
The top four providers - Lloyds Banking Group, HSBC, Barclays, and Royal Bank of Scotland - hold a larger market share than they did in 2008 due to the sale of HBOS to Lloyds. The few new banks that have entered the market, such as Metro Bank, have failed to make a significant dent in competition levels. Plunging consumer trust in the top providers has had a modest impact on switching rates; Datamonitor's 2012 Financial Services Consumer Insight Survey found that only 4.8% of UK consumers switched their current account in the 12 month period up to October 2012.
However, competition levels will increase in the coming years despite the failure of the OFT's recommendations. The sale of almost 1,000 Lloyds TSB and RBS branches, the launch of Virgin Money, Tesco Bank, and M&S Bank's current account proposition, and an automated account switching service due to be introduced in September 2013 will combine to intensify market competition.
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