Stack tecnológico

9.8 The OFT has provisionally decided not to make a market investigation reference at this time. This is due to a number of developments affecting the PCA market in the coming months that may have a significant

impact on competition in this market and which would lead the OFT not to exercise its discretion to make an MIR. The reasoning for this

decision, including the competition concerns and market developments are set out below.

Competition concerns in the PCA market

9.9 The conclusion from this review is that longstanding competition

concerns remain in the PCA market. Our concerns have been set out in more detail in Chapters 3 to 7 of this report and are summarised here.

• The market has become even more highly concentrated since 2008.

The four large providers now have around 75 per cent of the market, and the financial crisis and recession have weakened the competitive constraint from the smaller providers. While there have been two new entrants in recent years – Metro Bank in 2010 and M&S Bank in 2012 - neither is yet in a position to significantly challenge the established providers.

• There has been a significant reduction in the level of overdraft charges. Overall the OFT estimates that there have been consumer savings of between £388 million and £928 million since the 2008 market study. During this period, unarranged overdraft revenues fell substantially, and despite increased revenues from arranged

overdrafts and debit interest, there is a substantial saving for consumers. While the overall reduction is significant and welcome, this appears to be largely the result of pressure from OFT and others, rather than competition between providers. While the OFT welcomes the shift away from hidden and unexpected charges to

exercise its discretion to make an MIR it would, of course, need to be satisfied that the Section 131 test was met.

charges that are clearer and more predictable, overdraft charging structures remain complex and there is more providers could do to simplify charges and make it easier to compare the costs of

different accounts.

• Providers have made progress in helping consumers control when they use unarranged overdraft facilities and the charges they incur.

Mobile technology along with balance alerts mean it is easier for consumers to manage their account and avoid incurring charges.

However, awareness of text message alert services is low.

Furthermore, opt-outs from unarranged overdraft facilities are not offered across the board – providers typically offer opt-outs on a limited range of accounts which often attract a monthly fee.

• Providers have begun rolling out the transparency initiatives previously agreed with the OFT. However, providers have been slow to make progress – three years after these initiatives were agreed, not all customers have received an annual summary. Early indications are that this information will improve consumers' understanding of the costs of their account and therefore aid

decision-making but the slow progress in roll-out means the impact to date has been limited.

• There have been improvements in the functioning of the current automated switching process. However problems still arise, and there remains a perception among consumers that the process is risky and complex. The rate of switching remains low.

9.10 The OFT considers that these concerns represent a significant source of consumer detriment. The market is large, with over 61 million PCAs in the UK being used regularly by 94 per cent of the UK adult population.

Given the size of this market and its significance to the functioning of the wider economy, we consider that even small improvements in competition in this market could generate substantial benefits for customers. In principle, therefore, we consider that an MIR could be a proportionate response to the concerns raised. However, for the reasons

set out below, the OFT has provisionally decided not to make an MIR at this time.

Discretion to make a reference

9.11 There are three significant developments happening or expected in the PCA market in the coming months. These could potentially have a significant impact on the effectiveness of competition in the PCA market, but this outcome is by no means guaranteed and it is not

possible to determine their impact at this stage. These developments are the following:

• divestments by Lloyds Banking Group and RBS

• the new account switching service

• completion of the roll out of transparency initiatives.

9.12 First, significant structural change is expected by the end of 2013, with divestments from both Lloyds Banking Group and RBS as a result of State Aid requirements from the EC in approving capital injections for both businesses. Lloyds Banking Group is expected to divest around 600 branches with associated customers, representing a share of 4.6 per cent in the PCA market in the UK. RBS is expected to divest over 300 branches and associated customers, representing a share of two per cent in retail banking in the UK. Further details on these transactions and their implications can be found in Chapter 4.

9.13 Collectively, these two divestments are expected to increase

significantly the size of one or two smaller providers in the market, or facilitate new entry. The extent to which these divestments will allow current or new providers to challenge significantly the existing large providers and start a process of moving the market towards a more competitive equilibrium cannot be determined at this time. This will depend on which organisation purchases the divested businesses, and how they seek to compete with the remaining providers in the market. In addition, it is not possible to assess at this stage whether these

divestments will act as a springboard allowing the purchasers to further

gain market share on an ongoing basis from a greater willingness among consumers to consider switching to alternative providers.

9.14 Second, the new account switching service is due to become available from September 2013. As set out in Chapter 6, this service should

represent a significant improvement to the switching process. As such, it has the potential to increase consumers’ willingness to switch accounts, in particular because it may address the perception that switching

accounts is difficult. Any increase in consumers' willingness to consider switching is likely to be more significant if the launch of the new

account switching service is accompanied by significant publicity.

9.15 The scale of the impact from this measure is unclear in advance of its launch. We note that research indicates that some consumers do not perceive significant value from switching, and that it is difficult currently for consumers to compare accounts and assess for themselves the benefits of switching provider. Many of the recommendations in this report are designed to address these issues, and therefore increase the likelihood that the new switching service will lead to increased

willingness among consumers to consider switching PCA provider.

9.16 Third, the initiatives to promote transparency in the market have not been rolled-out completely, with roll-out of some initiatives continuing in the first half of 2013. While the early indications are that some

consumers find these initiatives helpful, we cannot assess the full impact of these initiatives on consumer understanding and decision-making until they have been implemented in full and consumers have had time to see and consider them.

9.17 In addition to these developments, the creation of the FCA in April 2013 may also play a role in stimulating effective competition. While the FSA has not had a strong competition remit, the new FCA will have an operational objective of promoting effective competition in the interests of consumers in the markets for regulated financial services and services provided by recognised investment exchanges. It will also have an

accompanying duty to discharge its general functions in a way which promotes competition in the interests of consumers (where that is

compatible with its other operational objectives). This stronger

competition remit will mean that the FCA will take a different approach to regulation²⁵⁸

9.18 Collectively, these changes and the resulting flux in the market and uncertainty over their effects, mean it would be difficult at this time for the CC to reach robust judgements about how competition is likely to evolve in the short term, and how to design appropriate, effective and proportionate remedies to any adverse effects on competition. As a result of those developments, the OFT considers that it is questionable whether all four of the discretionary criteria set out in our guidance are satisfied at this time, even if they are satisfied, the OFT does not consider that it is appropriate to make an MIR to the CC at this point in time. In addition, the OFT’s programme of work on retail banking will allow us to consider whether the scope of any potential MIR should be restricted to the PCA market or cover number of retail banking markets or the retail banking sector as a whole.

from that taken by the FSA, which is likely to provide a further stimulus towards effective competition.

Consultation on the provisional decision

9.19 Under Section 169 of the Enterprise Act 2002, when the OFT is

considering whether to make a decision on a reference to the CC it must first consult, so far as practicable, any person on whose interests the decision is likely to have a substantial impact.

9.20 This report sets out the reasons for the OFT's provisional decision not to refer to the CC the market for PCAs in the UK. We invite comments on this provisional decision by 8 March 2013.

9.21 Comments can be sent by email to [email protected] or by post to:

258The intended approach of the FCA to its regulatory objectives, how it intends to achieve a fair deal in financial services for consumers and where it is on this journey were set out in 'Journey to the Financial Conduct Authority'. See www.fsa.gov.uk/about/what/reg_reform/fca for details.

Retail Banking Team Eighth floor

Office of Fair Trading Fleetbank House 2-6 Salisbury Square London EC4Y 8JX