UK: Update On The Retail Banking Investigation

Last Updated: 27 January 2015
Article by Sam Szlezinger and Rebecca Owen-Howes

Latest developments

The Competition & Markets Authority (CMA) issued a short update on its retail banking investigation which includes services to SMEs at the end of last year. Since publishing its Issues Statement in November 2014, it has received standard off-the-shelf information from relevant parties in response to its initial information request, as well as comments on the three theories of harm it has identified.

In January and February 2015, the CMA is conducting site visits across the UK, visiting a number of parties to the investigation to find out how they carry on their business and how they differentiate their offers to consumers. During this time, it will be analysing detailed data and information provided to it by the parties and conducting a number of case studies looking at the barriers to entry or expansion that new and expanding players in the retail banking market might face. In terms of the latter, it has chosen to study some of the more recent market players Metro Bank, Tesco Bank, TSB Bank and Virgin Money as well as one building society, Nationwide. The case studies will also look at Atom Bank, which is a web-only offering expected to launch in 2015.

The CMA will be using GfK NOP to carry out surveys of personal current account (PCA) customers according to the methodology the CMA published earlier this year. The focus of the survey will be a sample of main PCA accounts from 13 different providers, representing the incumbent banks, challenger banks (such as Metro Bank and TSB Bank) and banks covering Northern Ireland and Scotland. GfK will carry out around 5,000 telephone interviews with account holders, a higher proportion of whom will have switched and/or opened an account within the last year.

More recently, the CMA has announced that it will be carrying out surveys of SME customers. However, it does not intend to commission a full-scale survey of these customers, as it has done for PCAs. Instead, it plans to analyse existing survey evidence used in the earlier market study on SME retail banking and to supplement this with short interviews with a subset of SMEs (500-1,000 in total).

Responses to Issues Statement

To date the CMA has published 26 responses, coming mostly from financial institutions but also from consumer and business groups. It has also received other submissions from a small number of consumers.

All market players recognise in their responses the paramount importance of this investigation for the industry as a whole. However, they also underline the fact that the investigation as it currently stands appears unbalanced in favour of PCAs, with the SME market being given less weight. The CMA's latest notice on its survey proposal for SMEs (see above) may be seen as further evidence of this.

What the banks say on...

Behavioural economics

The competition regulators in the financial services sector appear to take a different view on whether or not they should use behavioural economics to improve customer research by taking account of consumer bias. The FCA is a keen supporter of behavioural economics and has used these tools in recent market studies, including for example in its market study on general insurance add-ons.

The CMA, on the other hand, has favoured a more traditional approach in past investigations and has undertaken customer surveys. It will continue down this route in the retail banking investigation as shown by the draft PCA customer questionnaire and methodology which it published recently.

Lloyds Banking Group submitted a paper (prepared by Frontier Economics) to the CMA on how behavioural economics can improve customer research in retail banking markets. It points to some examples of where the use of the more traditional customer survey method in retail banking has failed to predict actual outcomes and advocates the use of alternative methods.  Such methods would include field trials, laboratory experiments and measuring the emotional response to certain stimuli and eye movement.

The results of the CMA's customer surveys will be very important in shaping the direction of the investigation. If the results are inaccurate or misleading because of the methodology used, there is a risk that any remedies proposed by the CMA will not be the right ones. Will the statement by the CMA that the PCA customer questionnaire will be "rigorously tested through cognitive testing" be a sufficient defence against possible challenge on this basis?

Current Account Switch Service

Since its introduction in 2013, the Current Account Switch Service (CASS) has been used as an important indicator of the health of effective competition within the retail banking industry. Many players, especially the bigger banks, state in their responses to the Issues Statement that CASS is not fair and true evidence of a competitive environment for customers and that its weight within this market investigation needs to be largely downsized.

The lack of reliability of CASS is mainly attributed to the phenomenon of "silent switching". According to many responses, the vast majority of customers will open a new account whilst retaining their old account, and transfer functions over time, closing one of the accounts only subsequently, without going through any recorded switching channel. Another argument which has been raised by many banks to support the untrustworthiness of CASS is the number of dormant accounts, which has the effect of distorting any industry statistics. The inertia of customers has created a substantial number of PCAs which are neither used nor regularly monitored. These accounts artificially inflate the number of current accounts held nationwide, therefore decreasing the percentage of people switching from one provider to another.

As well as the question of what evidential weight should be placed on CASS, there are a number of outstanding problems with the switching process itself under this mechanism. These include, for example, the fact that the forwarding of payments lasts only for a limited period (highlighted by Yorkshire Building Society). Is it sensible to continue with the same switching system, or is it time for real change?


It is no surprise that the various players in the retail banking market have differing views on possible remedies to deal with the competition concerns the CMA has outlined. A number of the challenger banks think that the CMA should consider altering the structure of the market by requiring divestment of some kind. TSB Bank, for example, relies on the OFT's observation in the 2008 PCA Market Study that the optimal market share for an effective competitor was in the range of 5 to 14 per cent. TSB Bank would like the CMA to use this market share range as a starting point in considering whether there are a sufficient number of challenger banks with the scale to offer meaningful competition. Divestment by the incumbent banks would be necessary to achieve change at this level.

Aldermore considers that competition could be rapidly stimulated if the state-owned banks (RBS and Lloyds Banking Group) were to be broken up, particularly those parts of the banks providing services to SMEs, and challenger banks were allowed to acquire them.

There is a greater emphasis by many more of the banks on behavioural remedies. Some players (for example Virgin Money) have suggested introducing account portability in the retail banking sector to deal with the low level of switching. This move has been successful in the telephone and mobile phone sectors, where customers are able to take their phone number with them when they change supplier.

We have already mentioned above that CASS has so far failed to address all concerns of customers. It may be that another possible remedy would be for improvements to be made to this switching service to increase customer engagement and transparency (see, for example, Nationwide Building Society's response to the Issues Statement). Other possible options include requiring banks to send a "prompt" to customers to make them consider switching; and the provision by banks to customers of information in standard format about PCA charges, similar to the credit card summary box that customers receive now from their banks (uSwitch makes this point, for example).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Events from this Firm
28 Sep 2017, Seminar, London, UK

On 26 July the FCA published its long-expected consultation paper on the extension of the SMCR to all FCA-authorised firms. The so-called "core regime" introduces the key concepts of regulator-approved senior managers, firm-approved certification staff and conduct rules applicable to virtually all staff.

3 Oct 2017, Conference, Zurich, Switzerland

As the founding Partner of the Europe-Iran Forum, Dentons Europe will once again support this year’s event. This compelling event which explores all Iran-related topics will take place in Zürich on 3rd and 4th October.

4 Oct 2017, Workshop, London, UK

We are hosting an interactive workshop where we will run a mock High Court trial of an employee competition case – where the members of the audience are the judges. The session, aimed at in-house counsel and HR professionals, will offer an insight as to how disputes involving employees moving to a competitor play out in practice.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.