Following the Chancellor of the Exchequer’s speech and the continued debate on the Financial Services Bill in the House of Commons, the All-Party Group on Challenger Banks and Building Societies has published a new report calling for further action to drive competition and better customer outcomes in the UK banking sector.
The report on Diversity in the UK Banking Sector has taken three years to put together based on evidence from a broad range of witnesses.
The consensus was that there was a lack of competition in the sector which was being enforced by a one-size-fits-all regulatory system that needs significant reform. The APPG has made a number of recommendations on how to deliver this; some simple and straightforward, others bold and radical.
Rt. Hon Karen Bradley MP commented: “The introduction of the UK Financial Services Bill is very welcome, as is the Government’s admission that it will be the first of many. This legislation is focussed on delivering the Governments commitments over international rules such as Basel III and putting EU legislation into UK law ahead of Brexit. There will also be benefits to consumers and UK firms from the Government’s approach.
However, given the importance of the financial services sector to the UK economy, and the systemic challenges faced in the UK, the Government needs to go further. More than a decade on from the 2008 financial crash, there is still far too little competition in the UK banking sector. Despite being bailed out at huge public expense, consumer banking in the UK continues to be dominated by the same small cabal of firms deemed too big to fail.
While there are some new entrants to the market, the current regulatory structure makes it impossible for them to compete with the larger players. The UK regulatory system needs to create a viable pathway for start-ups to challenge the established high street banks.”
I welcome the Government recognition that post-Brexit Britain needs a dynamic, diverse consumer finance sector fit for the 21st Century. While our regulatory framework has shown great promise in encouraging financial start-ups, it does not yet provide a platform for them to grow and scale into major financial players. This needs to change and the APPG believes the recommendations in this report will go some way to delivering that.”
It comes amidst new research from money-planning app HyperJar, which has found that over half of people in Britain say the current banking structure leaves them with no incentive to save, whilst a third say that their bank gives them no help in planning their finances or developing a budget.
Key points from the research include:
- 52% of people in Britain (25,093,000) believe that the current banking structure leaves them with no incentive to save
- 18% of people in Britain (8,594,000) say that they believe that their finances are the least organised part of their life
- 32% of people in Britain (14,152,000) say that their bank doesn’t help them to budget and plan for day-to-day finances
- 26% of people in Britain (12,522,000) say that even before Covid-19, they had no savings or emergency buffer
Matt Megens, CEO of HyperJar said: “There’s been a hostile environment for saving and planning for years, and the gravitational pull of easy credit has never been stronger. A new way for people to budget and spend well is overdue.
“In the current landscape, when many people are facing considerable financial struggles as a result of the pandemic, it is arguably more important than ever to help consumers develop more sustainable spending habits and boost their ability to save their money.”