Two years in the making, the CMA's Open Banking report came out today, promising more transparency for UK banking consumers, open APIs and easier account switching.
The Competition and Markets Authority (CMA) was tasked with investigating the supply of personal current accounts and banking services to small and medium-sized enterprises (SMEs) in 2014, issuing its final report this week alongside a set of proposed reforms.
Alasdair Smith, chair of the retail banking investigation, said of the report: "Our central reform is the Open Banking programme to harness the technological changes which we have seen transform other markets. We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs."
Here's everything you need to know from the report.
Banking as a platform is coming
The first suggested reform is to create "a single app for customers to view multiple bank accounts."
This sounds like a move towards banking as a platform, a concept some of the UK's biggest banks have been talking about for a while now. See: RBS, HSBC and Nationwide predict shift towards 'banking as a platform' through open APIs
Banking as a platform would see consumers less locked into a single bank. Instead, customers would have their current account with one provider and then bolt on other financial services such as an ISA, mortgage or investments through other providers, all under the user interface of their choosing: 'a single app'.
This can only happen once the banks open up their data through application programming interfaces (APIs). Which brings us to...
Open APIs should be in place by 2018
The CMA is seeking to force all banks to implement its Open Banking policy by early 2018.
The authority laid out how this would look for customers: "Open Banking will enable personal customers and small businesses to share their data securely with other banks and with third parties, enabling them to manage their accounts with multiple providers through a single digital ‘app’, to take more control of their funds (for example to avoid overdraft charges and manage cashflow) and to compare products on the basis of their own requirements." This will be delivered via open APIs.
Commentators aren't convinced though
Diane Coyle, professor of economics at Manchester University, is unconvinced this will make a major difference to consumers.
Speaking to the BBC's Today Programme she said: "So called "open banking" - which allows consumers to compare costs for particular services - is unlikely to prove effective because it requires consumers to give all their financial information to third party providers." She believes that is something people will be reluctant to do.
Paul Briault, director of digital security and API management at CA Technologies, said banks "will have to get to grips" with APIs quickly and ensure consumer confidence that their data is safe.
"Banks and third party providers will need to reassure consumers that they have the appropriate security measures in place, to prevent fraud and respect data confidentiality before any new services are rolled out," said Briault.
Listen - The UK Tech Weekly Podcast discusses the CMA report:
Banks should keep customers informed
The report also appears to want to push banks towards providing more push notifications, for example via SMS or email, around events such as accidentally slipping into your overdraft, or a local branch closing down. The CMA wants to clamp down on banks making £1.2 billion a year from unarranged overdraft charges by forcing them to inform customers before they become overdrawn.
Consumer body Which? has accused the CMA of not going far enough with its reforms though. Director of policy and campaigns Alex Neill told the BBC: “It is disappointing that the monthly charge cap is not actually a cap and banks will be allowed to continue to charge exorbitant fees for so called unauthorised overdrafts, rather than protect those customers that have been identified as among the most vulnerable."
These changes are with the intention of reminding "customers to review whether they are getting the best value and switch banks if not," said the CMA.
They want to make it easier to switch accounts
At the moment just three percent of personal and four percent of business customers switch their bank every year. This is despite "personal customers in Great Britain being able to save £92 on average per year by switching provider," said the CMA.
The CMA wants to make it easier by forcing banks to be more transparent in terms of what consumers can save by switching and by "adopting standardised business account opening information requirements".
It should be good news for challenger banks
The report concludes that: "Older and larger banks do not have to compete hard enough for customers’ business, and smaller and newer banks find it difficult to grow."
The reforms therefore should be music to the ears of innovative fintech companies as the new APIs and open banking initiative creates opportunities to create new digital products for consumers off the back of banking data, such as digital wallets or banking comparison sites.
Read next: UK Fintech Startups to Watch
Melba Foggo, managing director at Sopra Steria financial services consultants, said: "Traditional banks will need to think about how to reinvent themselves to make the most of these changes; adjust their role in the market; and reassess their relationship with their customers, third parties and new entrants, who will also benefit from secured access to customer account information."
Paul Rippon, deputy chief executive of challenger Mondo Bank told the Today Programme: "There's a big question over how long these reforms will take to come in and how effective they will be."
Banks will need to keep improving their mobile apps
Peter Roe, research director at TechMarketView, sees the changes as yet another source of pressure on the major UK banks, and said "they will have to respond by being as good as the fintech startups around them".
He said: "The average monthly number of customer interactions with their bank has grown by 50 percent in the past five years, to 3.5, but the BBA expect that this number will increase by 80 percent over the next five years, driven by mobile.
"As the smartphone is increasingly used for more sophisticated transactions (particularly by younger, tech-savvy customers) this will likely require significant further investment in the banks’ mobile apps portfolio."
"If a bank has not yet adopted agile development techniques, a good partner ecosystem and a robust mobile platform which can facilitate rapid service innovation, they’d better hurry up!”