FCA chief mulls “significant action” on bank overdrafts

By Daniel Lanyon on 28th June 2018

Challenger Banks

The UK financial regulator has published an update on its ongoing review into the retail banking sector.

FCA chief mulls “significant action” on bank overdrafts

Could alternative finance and fintech players help disrupt the overdraft market? The UK’s regulator has given an update to its ongoing review into whether the UK retail banking market needs more competition.  

It thinks it does. Andrew Bailey, chief executive of the Financial Conduct Authority said of its Strategic Review of Retail Banking Business Models that substantial change could be around the corner for retail banking with markets currently remaining highly concentrated.

The broad-ranging review examines in particular that personal current accounts, how they are paid for and how the new era of Open Banking and PSD2 will shift banks business models.

It found that most current account customers contribute to their bank’s profits, but a small proportion pay significantly more than others. Approximately 10 per cent of customers generate between a third and a half of all contributions to profits from current accounts.  The data also show that many consumers go to their current bank rather than shopping around when looking for other financial products.

“It provides more evidence that there is no such thing as free banking. In particular, this evidence will inform the work we are doing on overdrafts, so we can fully understand the potential effects of the significant action we are considering taking in this market,” Bailey said.

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