Consumer Panel urges CMA to focus on price transparency

6 November 2014

Consumer Panel urges CMA to focus on price transparency

The Financial Services Consumer Panel has welcomed today’s decision by the Competition and Markets Authority (CMA) to launch a full market investigation into the personal current account sector, but has urged the CMA to focus its investigation on the lack of price transparency in the ‘free if in credit’ banking model.

Sue Lewis, Consumer Panel Chair, said:

“Effective competition is vital to help consumers get a good deal, but diversifying the market will not by itself make any difference. Bank account switching remains low compared to switching between providers in other sectors, because consumers can't judge the value of the deal they are getting from their personal current account, or whether they could get a better deal elsewhere. Cross-subsidies within the current account market, and between products, obscure the true price consumers pay.”

The Panel believes that a competitive market for current accounts requires people to switch in response to price and quality signals. However, the complexity and opacity of cross-subsidisation in the personal current account market means that consumers do not know what price they are actually paying for their accounts. In September, the Panel published a discussion paper on cross-subsidisation in the market for personal current accounts, which called for an in-depth investigation of cross-subsidies and the true cost of banking for consumers.

Notes to editors.

1. The Panel submitted its discussion paper[1] on cross-subsidisation in the market for personal current accounts to the CMA’s consultation, calling for an in-depth investigation of cross-subsidies and the true cost of banking for consumers.
2. 94% of all current and deposit accounts are held with only six banking groups. The market remains static: half of all account holders have never switched, and only one in twelve has done so in the past year.
3. By comparison, 3.4 million electricity customers switched provider in 2013, representing 12% of all such customers in the UK (DECC/OFGEM). Similarly, a fifth (20%) of consumers switched at least one communications service between Q3 2012 and Q3 2013 (OFCOM).
4. The Consumer Panel is a statutory body under the Financial Services Act 2012. It was initially established by the Financial Servicse Authority in December 1998. The panel advises the FCA on the interests and concerns of consumers.
5. The Panel's membership is drawn from a broad range of backgrounds with expertise including market research, law, financial services industry, financial inclusion, European Regulation, financial regulation, consumer advice, campaigning, communications, compliance and later-life issues.
6. The emphasis of the Panel's work is on activities that are regulated by the FCA, although it may also look at the impact on consumers of activities outside but related to the FCA's remit. More information about the Panel's work is available here[2].