The UK’s Financial Conduct Authority (FCA) has launched a review to assess the different types of business models in the retail banking industry.

The review, which will be carried out in two phases, will study the models of retail banks, building societies, as well as credit unions.

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In particular, the review aims to evaluate how free-if-in-credit banking is paid for, and understand the impact of increased digitisation and reduced branch usage on business models.

The first phase of the review will focus on gaining insight into which areas of retail banking are profitable, how profits are distributed across various markets participants, how revenues and costs in one business are linked to another, and how personal current account profitability works.

The second phase of the review will seek to explore the effect of changes in economic, technological, social and regulatory factors on retail banking business models.

The FCA said: “Retail banking has been experiencing significant economic, technological, social and regulatory changes. The effects of these changes are expected to continue in the coming years, with ‘lower for longer’ interest rates, Open Banking, increased use of digital channels by consumers, regulatory interventions such as ring-fencing, and the remedies introduced by the Competition and Markets Authority (CMA).

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“Against this background, we have been considering what we need to do in order to build a robust evidence base to enhance our understanding of the state of competition and conduct in retail banking markets at a pivotal time of change.”

The FCA plans to publish conclusions from the review’s first phase in the second quarter of 2018.