David Prosser: When consumers are the problem

Outlook With the Independent Banking Commission cranking up its inquiry into the structure of the industry, the Office of Fair Trading's report yesterday on how easy it is for new banks to break into the business makes interesting reading. Its main conclusion is that the biggest problem for would-be banks is not so much the launch process, but winning customers.

Winning regulatory approval for a new banking venture can take some time, the OFT warns, and capital requirements are tough. But much more challenging, it says, is the difficulty of persuading retail customers to switch providers.

It's a disappointing conclusion, given that consumer groups – and the media – have spent much of the past 20 years urging banks'customers to shop around for a better deal. But it's also something of a headache for the Independent Banking Commission, because it is difficult to know what the remedy might be.

A good deal of the regulation imposed upon banks in recent times has been aimed at getting rid of impediments to customers switching. In that sense Britain has one of the most open markets in the world. However, offering consumers better choices is one thing, but persuading them to act on them is quite another.