The Competition and Markets Authority (CMA) has announced the measures after finding 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 require banks to implement Open Banking by early 2018, to speed up technological change in the UK retail banking sector.

Open Banking allows customers to manage their accounts with multiple providers through a single digital ‘app’.

CMA’s retail banking investigation chairman 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.

“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.”

Banks are required to publish trustworthy and objective information on quality of service on their websites and in branches, enabling customers to know how their own bank shapes up.

The reforms also ask banks to send out suitable periodic and event-based ‘prompts’ to remind customers to evaluate the services received by them and change banks if they are not satisfied.

Smith said: “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.”

The CMA has also announced specific measures to benefit unarranged overdraft users.

Banks will now be needed to alert customers going into unarranged overdraft, and inform them of a grace period, to avoid charges.

The competition authority also stipulates banks to offer financial backing and technical support for independent charity Nesta, a new initiative for small businesses which lack tools to provide comprehensive information about bank charges, service quality and credit availability.

Image: The Competition and Markets Authority headquarters at Victoria House, London. Photo courtesy of Tony Hisgett/Wikipedia.