The interim findings of the Financial Conduct Authority’s (FCA) research indicate that because many consumers do not shop around, banks are able to pay lower interest rates to customers that have stayed with the same account for a number of years. In addition, the largest personal current account providers are able to attract a large proportion of easy-access deposits despite on average offering lower rates.
Christopher Woolard, director of policy, risk and research at the FCA, said:
“Our preliminary view is that while some aspects of the cash savings market are working well competition does not appear to be working in the interest of many consumers.
“In this market there is a minority of very active, very engaged consumers who regularly change provider to get the best deal. We want to look more closely at what is inhibiting the majority of consumers from getting better deals.”
When conducting market studies, the FCA is looking to find a market in which informed consumers are able and willing to take advantage of the best products for them, with firms actively competing to win business by improving the products they offer.
The FCA will now undertake further research before taking a view on whether it should intervene to ensure competition is working in the interests of consumers. As well as considering the feedback to its initial findings, the FCA will look at the extent to which it might be able to promote greater consumer engagement, including:
- what could be done to ensure that more consumers are aware of the rates they receive and the rates on offer on other accounts
- what information customers are given when rates are changing
- whether it is possible to give consumers greater insight into how their interest rate is likely to evolve over time, especially after any introductory offer ends, so that they can make an informed medium-term choice between providers when opening an account
- what could be done to make it easier to move savings to a new provider
- whether other interventions may be necessary to improve outcomes for customers overall
The final report into cash savings will be published in late 2014.
Notes for editors
- Cash savings market study: interim report.
- Press release: FCA to carry out market study into cash savings, September 2013.
- On 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA.