Banks are paying lower rates to customers who have stayed with the same account for several years because consumers do not shop around, the Financial Conduct Authority has found, and as a consequence it is considering stepping in.
Interim findings of the FCA’s market study into cash savings, published today (8 July), found that the largest personal current account providers are able to attract a large proportion of easy-access deposits, despite on average offering lower rates.
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, it 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; and
• whether other interventions may be necessary to improve outcomes for customers overall.
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.”
The final report will be published in late 2014. The study into the £1,000bn cash savings market was launched last autumn.
