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Press releases 2013 -

OFT says major change still needed in personal current account market


10/13    25 January 2013

A review of the personal current account (PCA) market has concluded that further significant changes are still required to tackle longstanding competition concerns and a lack of focus on customers' needs.

The OFT has published a review of the £9 billion market today as part of its ongoing programme of work on retail banking. It found that since the OFT last looked at current accounts in 2008, the major banks have increased their share of the market, entry by new competitors remains infrequent and consumers still only rarely switch to an alternative provider.

There have been some specific improvements. In particular, since its previous action, the OFT estimates that people have saved up to £928 million a year from the fall in unauthorised overdraft charges between 2007 and 2011, although overdraft charging structures remain too complex. 

The OFT found that, despite improvements, comparing the costs of current accounts continues to be challenging and that people lack confidence in the switching process. Overall, a combination of a lack of competition, low levels of innovation and customer apathy in the face of unclear costs and a lack of diversity in the choices of current accounts available mean that this market is not working well for consumers or the wider economy.

A number of major developments are expected in the market over coming months, including the sale of branches from both Lloyds Banking Group and Royal Bank of Scotland, a new automated account switching service and the completion of existing initiatives intended to make it easier for customers to compare products and services.

The OFT is also today making additional new recommendations, building on its previous initiatives, to make PCA costs more transparent, the switching process more reliable and improve the way in which unarranged overdrafts are provided. It is calling on banks and building societies to make rapid progress in implementing these recommendations, as well as being more proactive in ensuring that their products and services are better aligned with the needs of their customers.

The OFT believes that these changes have the potential to have a positive impact on competition in the market and as a result, it has provisionally decided not to make a Market Investigation Reference to the Competition Commission. It plans to revisit the question by 2015, in line with a recommendation by the Independent Commission on Banking.

Clive Maxwell, OFT Chief Executive, said:

'Personal current accounts are critical to the efficient functioning of the UK economy. Despite some improvements, this market is still not serving consumers as well as it should.

'Customers still find it difficult to assess which account offers the best deal and lack confidence that they can switch accounts easily. This prevents them from driving effective competition between providers.

'There will be major changes to the personal current account market over the coming months. For these changes to improve the effectiveness of competition in this market, banks and building societies need to act now to improve the quality of service and value for money they provide their customers.

'The retail banking sector needs to become more competitive and customer-focused to ensure that further action by the competition authorities is not required.'


  1. The OFT's evaluation estimates annual consumer benefits from the fall in unarranged overdraft charges to be at least £928 million. However, there has also been an increase in charges for arranged lending some of which may have occurred as a result of the fall in unarranged lending charges. The evaluation therefore finds that total annual consumer benefits are between £388 million and £928 million and more likely to be at the upper end of this range. Download the OFT's evaluation of its PCA review (pdf 903kb).
  2. Read the executive summary of the follow-up report. The full report with further background is available on the market study page.
  3. The Independent Commission on Banking (ICB) recommended, among other things, that the OFT consider making a market investigation reference to the Competition Commission by 2015 if it had not already done so and if sufficient improvements in the market have not been made by that time. The OFT has provisionally decided not to make a reference and is consulting on its provisional decision.
  4. The PCA market is the cornerstone of the UK's retail finance system and an essential service for 90 per cent of adult consumers. However, the OFT's market study in 2008 concluded that the PCA market was not working well for consumers. The OFT was concerned that a combination of complexity and opacity, particularly with regard to unarranged overdraft charges, makes it extremely difficult for individual customers to know how much their account could be costing them compared with others on offer. This, together with perceived difficulties in switching, has led to very low switching rates and a reduced incentive for banks to compete on price or provide new products and services.
  5. The OFT's market study found that, in 2006, the aggregate revenue of banks from personal current accounts was approximately £8.3bn - £152 per active account. 81 per cent of income came from two sources: unarranged overdraft charges (31 per cent) and net credit interest income (50 per cent). This review has found that, in 2011, the aggregate revenue of banks from PCAs was £8.8bn - equivalent to £139 per active account. 64 per cent of income came from two sources: unarranged overdraft charges (21 per cent) and net credit interest income (43 per cent).

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