UK’s Financial Conduct Authority (FCA) has found evidence of increasing competition in the retail banking space, despite the challenges presented by the Covid-19 pandemic.
The regulator stated that the increasing competition has resulted in more choices and lower prices for consumers.
Go deeper with GlobalData
As part of the update to its 2018 strategic review of retail banking, the regulator found signs of weakness in large banks’ historic advantages due to changing consumer behaviour and digitalisation.
Sustained low-interest rate is among the reasons that have affected banks’ financial returns, the FCA said.
Digital banks recorded an increase in personal and micro-business current accounts between 2020 and 2021.
On the contrary, the largest banks’ shares slumped, even as they lent proportionately more to microbusinesses during the pandemic.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataFCA noted that the competition, which is the result of rising reliance on brokers, benefited mortgage borrowers via lower interest rates.
However, the increased competition made it harder for smaller players to compete.
As a result of FCA reforms to the credit market, lenders’ have recorded a sharp decline in their yield for unarranged overdrafts.
FCA’s measures also resulted in a drop in yield on authorised overdrafts.
Banks’ and customers’ adoption of digital innovations has resulted in improved service quality and satisfaction especially for mobile and app-based users, the watchdog further noted.
FCA chief economist Kate Collyer said: “Competitive pressures and innovation are starting to deliver for retail banking customers, with greater choice, lower prices and more convenient ways to bank.
“But changes that may benefit many of us can also be a risk to those in vulnerable circumstances, which is why we have put in place guidance on the closure of branches and ATMs. We are also consulting on a new consumer duty to set higher expectations for the standard of care that firms provide.
“Our research clearly shows the impact of the measures we took to reform the overdraft market and protect those financially affected by Covid.”
