Several years ago in the United States there were many complaints about banking practices that left consumers, especially small businesses and those with smaller accounts, completely in the dark about fees.
The news yesterday was that banks in the United Kingdom were now hanging under the same cloud. The United Kingdom’s Competition and Markets Authority announced that it was launching a full-scale investigation into both personal current accounts and SME banking. The probe follows a three month consultation exercise.
Two studies were published by the CMD in July that demonstrated that banking products seemed to be shrouded in a regulatory nightmare that greatly limited transparency.
This prevented new entrants from taking a piece of the market share from the largest of the banks and recent initiatives to help newcomers gain a foothold only resulted in minimal changes in the market share.
John Longworth, Director General of the British Chamber of Commerce said about the new investigation:
“This investigation represents a unique opportunity which must be seized, in order to deliver real change in the banking sector. For many years Britain's dysfunctional banking sector has struggled to meet the needs of SMEs, impeding the growth prospects of some of our most promising young companies."
Because of the limited transparency, new customers often had a hard time distinguishing between banking products/accounts, or even making an informed choice about which banking institution best fit their particular needs. The commission determined that the free-of-credit model could easily distort competition and the Telegraph even speculated that something like this could be the end of traditional banking.
The larger banks volunteered to take two steps, opening up a comparison website and implementing improved account opening standards but the CMA declined the offer and assigned the investigation to a Market Reference Group that will be composed of the CMA’s panel of independent members.
The first step in the process is for the panel to publish a timetable for the investigation. There has not yet been an announcement as to when the investigation will begin or when the investigatory panel will be releasing its timetable.
The Chief Executive of TSB Bank Paul Pester said about the announcement:
“Consumers have been crying out for a root and branch investigation like this for years and we have previously said the CMA would be uniquely placed to carry out this complete review of the market. The Big Four banks have had a stranglehold on the market for far too long. TSB believes the CMA investigation should focus on achieving greater transparency in banking along with more choice and competition.”
But not everyone in the banking sector agrees that the banks are interested in compliance or changing the status quo though the British Bankers Association said that it would cooperate fully with the investigation. BBA Chief Executive, Anthony Browne, said:
"There are already substantial changes currently underway across the banking industry to strengthen competition, which improves choice and service for customers. Banks are pro-competition - they compete for business every day. This summer we published a series of ideas to help new banks set up and smaller players to grow. We hope these suggestions will be taken up by regulators and politicians.”
The Twitter Sphere was also ablaze with the news of the investigation with most tweets commenting that it is about time something was done about the issues. This is one of the first investigations of its type in either British or US banks and it seems that most people agree that something should be done to level the playing field.
While the news has yet to filter to the Bitcoin community, the same British banks were accused of stifling Bitcoin startups as Cointelegraph reported back in August, which shouldn’t come as too big of a surprise considering a report issued by the Central Bank of England deeming cryptocurrencies as a “possible future threat” to the banking sector.
Indeed, decentralized cryptocurrencies such as Bitcoin could present a unique opportunities for customers who might now wish to take greater control of their money because they naturally offer a great deal more transparency (i.e. the public ledger) than any bank possibly could.
Therefore, while the proposed measures could bolster competition among banks, the real question might be whether the increasing awareness among the customers of major banks’ questionable practices could drive these people to Bitcoin and the world of cryptocurrencies in general.
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