The U.K. Competition and Markets Authority said on Tuesday that banks would have to implement an open banking system by early 2018, as part of a draft of measures designed to ensure that both personal customers and small businesses get a better deal.
Open banking will enable personal customers and small businesses to share their data securely with other banks and third parties, enabling them to manage their accounts with multiple providers through a single digital ‘app,’ to take more control of their funds, the regulator said. It will also help them compare products on the basis of their own requirements.
“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,” Alasdair Smith, chair of the retail banking investigation, said.
“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 U.K. economy,” he said.
The CMA added that banks will need to publish trustworthy and objective information on quality of service on their websites and in branches, so customers can see how their own bank is performing. They will also have to send out periodic and event-based ‘prompts’, such as on the closure of a local branch or an increase in charges, to remind customers to assess whether they are getting the best value and to switch banks if they are not.
To underpin the reforms, the CMA will introduce measures to make it easier for customers to search and switch accounts. At the moment only 3% of personal customers and 4% of business ones switch to a different bank in any year.