The U.K.’s Financial Conduct Authority said small lenders are struggling to gain market share as customers fail to compare deals for current accounts.
Savers tend to stick with their current account providers, making it “very difficult” for challenger banks to attract customers, the FCA said in a statement on its website today. That’s also allowing the largest current-account providers to pay lower interest rates than competitors.
Policy makers are trying to loosen the grip of Britain’s four biggest lenders, which control as much as 80 percent of the market and have been hit by scandals including the mis-selling of payment-protection insurance. Challengers such as TSB Banking Group Plc, Virgin Money Plc and Metro Bank Plc still account for less than 5 percent of deposits in the U.K., according to figures compiled by the Bank of England.
“While some aspects of the cash savings market are working well, competition does not appear to be working in the interest of many consumers,” said Christopher Woolard, director of policy, risk and research at the FCA in London. “We want to look more closely at what is inhibiting the majority of consumers from getting better deals.”
The regulator said it continue to analyze the cash savings market before deciding whether it should intervene to ensure competition. The final report will be published later this year.