Innovation slowly boosts open UK banks, regulator says By Reuters
© Reuters. FILE PHOTO: A general view is seen of the London skyline from Canary Wharf in London, Britain October 19, 2016. REUTERS/Hannah McKay/File Photo
By Huw Jones
LONDON (Reuters) – Innovation is finally weakening the market grip of Britain’s “big four” banks, but “challenger” lenders are finding it slow and costly to gain market share, the Financial said on Thursday. Conduct Authority.
Street banking has long been dominated by HSBC, Barclays (LON:), Lloyds (LON:) and NatWest (LON:), prompting Britain to make it easier for new banks to enter the market and make it easy for customers to switch banks.
“There are signs that some of the historical advantages of big banks may start to erode due to innovation and digitalization and changing consumer behavior,” the FCA said in an update. of its strategic review of retail banking business models.
But building market share has been an “expensive and slow process” for new banks and mid-tier lenders like Santander (MC:) and Nationwide, although online-only ones such as Starling and Monzo are making progress with about 8% of personal customer accounts, the FCA said.
“Despite this, traditional challengers offered additional choice and value to consumers who opened accounts with these challengers,” the FCA said in its update to a 2018 report.
But customer inertia is acting as a barrier to expansion among challengers, and the big four banks continue to earn higher returns on capital, a key measure of profitability, than most other banks, but l The gap has narrowed, he added.
CHART – FCA Banking Market Share Chart
Purely digital challengers don’t appeal to everyone and are likely to coexist with other business models for the foreseeable future, according to the study.
Banking industry body UK Finance said the review showed customers were benefiting from a competitive retail market, giving them a much better incentive to shop.
“Nearly 90% of UK adults now use online, mobile or telephone banking, but as the FCA points out, the technology is not for everyone, so the industry is committed to ensuring access to banking and cash services now and in the future,” said UK Finance.
Competition in the mortgage market has intensified following the introduction of requirements for banks to “protect” their retail deposits with additional capital, he said.
Critics say the liquidity ‘trapped’ inside the fence is used to offer cheap mortgages, increasing the Big Four’s market share.
“Smaller banks and building societies have struggled to compete with larger firms in the low-risk lending segment. Some have pulled out altogether; others have sought returns in other segments, including highest market risk,” the FCA said.
A government-sponsored review of the cantonment said in an interim report on Wednesday that the rules had not harmed competition in home loans.
CHART – FCA Mortgage Market Chart
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