The big banks must become more competitive as part of a more diversified business banking sector, according to the new Economic Secretary to the Treasury.
Andrea Leadsom worked in the finance sector for 25 years and has also sat on the Treasury Select Committee for the past four years.
She says her goal in her new role is to make sure the banking sector is working as best it can for consumers.
“At present, the largest four banks account for over 80% of UK SMEs’ main banking relationships,” she said.
“And we believe that such high concentration levels are bad for consumers and bad for businesses.”
Banks are being told to compete more, as part of a broader banking sector with greater innovation, including:
- Greater competition and innovation on fees and interest.
- More invention on bespoke products tailored to accountholders’ needs.
- New methods of payment and interaction, such as digital images of cheques.
The government is working to ensure legislation underpins this broader approach to banking, such as by introducing simple, seven-day switching to make it easier for people to change banks.
Smaller financial services providers and new banks are being protected to ensure they can get fair and equal access to payment systems infrastructure.
And changes to the capital requirements for new banks have made it easier to get a new financial institution up and running in the first instance.
Ms Leadsom made her comments at the launch of the Business Banking Insight survey, the first of its kind in the UK to ask businesses for their own thoughts on how well the banks serve their needs.
This survey is intended to produce a ‘banking ranking’, showing which of the financial institutions are perceived as the best by sole traders, micro-businesses, SMEs and big firms.
Not only should this make it easier to choose an account provider, but it should also help to highlight where individual banks are failing to compete, so that they can improve their offering for the future.