The UK’s Competition and Markets Authority (CMA) has ordered the country’s high street banks to share customers' data with third parties from 2018, in a bid to boost competition and accelerate technological change in the UK retail banking industry.
The open banking standard will allow customers to manage their accounts with multiple providers through a single digital app, take more control of their funds, and compare products, the competition watchdog said in a statement.
Chair of the retail banking investigation Alasdair Smith said: “The reforms we have announced today will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks.
“This is backed up by a wide package of measures to improve the current account switching service, to make it easier for small businesses to shop around and open new accounts or get a loan, and to see how the quality of service provided by your bank compares with other providers.
“We are breaking down the barriers which have made it too easy for established banks to hold on to their customers. Our reforms will increase innovation and competition in a sector whose performance is crucial for the UK economy.”
The regulator has also directed banks to publish information on quality of service on their websites and in branches, and send periodic alerts such as on the closure of a local branch.
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At the same time, British banks will now be required to alert customers falling into unarranged overdrafts in order to help them avoid charges. Banks currently make nearly £1.2bn per annum from such charges, the regulator said.
“Alongside this, banks will have to cap their monthly charges for unarranged overdrafts,” Smith said.