Bank customers 'could save £70 a year' by switching current accounts, CMA says

The Competition and Markets Authority has said that Britain’s high street banks should better educate customers about the benefits of switching

The battle between the banks to attract more current account customers moved up a level this week when Yorkshire Bank (and Clydesdale Bank) launched a market- leading £150 switching incentive. (BARBARA LABORDE | AFP | Getty Images)

UK competition watchdog the Competition and Markets Authority has said that banking customers could save themselves £70 a year by switching current accounts, and up for £260 a year if they are “heavy overdraft users”.

In a report of recommendations for changes to current account and business banking, the CMA has said that Britain’s high street banks should better educate customers about the benefits of switching. The report stopped short of advocating that the banks be split up.

"What's needed is a change in banks' behaviour. Breaking up banks won't change behaviour. Putting more information in the hands of consumers will be more help than a lengthy process of break-up," Alasdair Smith, head of the Competition and Markets Authority, said.

Current accounts, 85 per cent of which are provided by the a handful of major high street banks, will continue to be offered “free” of additional charges. That means the banks will continue to pay for them with higher overdraft charges and interest they keep aside to cover costs rather than passing on to the customer.

Banks welcomed the report. But Mr Smith warned that ill-informed customers would continue to be the source of bank profits in an interview on the BBC. "There are a substantial minority of customers who are paying too much and who are the source of bank's profits on current accounts,” he said.

Josh Ryan-Collins, associate director of economy and finance at the New Economics Foundation, said that the recommendations did little to bring real competition into the banking sector. "Consumers need access to new kinds of bank which are owned and run in their interests and can genuinely put their needs first, of the kind enjoyed by savers in countries like Germany and Switzerland – not just tweaks to the charges they pay to current incumbents," Mr Ryan-Collins said.