Banking review wants to see more choices for SMEs
A review of the retail banking market by the Competition and Markets Authority (CMA) is to call for a range of measures aimed at increasing choice for SMEs.
The final report will be published on 12 August but the CMA’s provisional decision on remedies was released last week. The paper calls for a package of measures including making lending products more transparent and the introduction of a ‘one stop’ comparison tool or website.
The CMA’s research found that 60% of personal customers had stayed with their bank for more than a decade and more than 90% of SME owners obtain their business loans from the bank where they hold their current account.
When looking at refinancing and other funding solutions, the CMA would like to see more transparency in the range and costs of products available. It found that information on loan costs and eligibility was not readily available and that the process could be very time-consuming, which could deter customers from seeking loans away from their regular bank.
It is proposing that lenders publish standard rates for unsecured loans and overdrafts of up to £25,000. It would also like to see larger banking providers offer free online tools that would give prospective business borrowers a provisional decision on whether they would qualify for the loan they were seeking.
The CMA is also recommending that the Treasury should work together with credit reference agencies and SME lenders to come up with a system for ‘soft searching’. This would allow SMEs to shop for credit and obtain quotes without each one showing up and negatively affecting their credit rating.
It would like to see the development of a standard banking open API or application program interface. This would allow customers to easily and securely share their banking history with other banks and trusted third parties. Banks would also be encouraged to collect and publish a wider range of quality measures that could be shared via APIs with intermediaries such as accountants and financial advisor, who could better use the information to advise SME clients.
By Phil Smith