More reaction to yesterday’s CMA report into the state of the UK’s banking market. Sentiment appears to range from enthusiastic endorsement of the mooted reforms to disappointment over a lack of substantive change to chronic problems.
Rob Straathof, CEO of alternative finance provider Liberis, said the recommendations did at least attack the fundamental issue of fairness for small businesses.
“For too long, UK small businesses have had to settle for using banks to raise capital, putting up with hidden costs and unarranged overdraft charges. These recommendations reflect what we continue to hear from small businesses: they want to be treated fairly, with one clear, understandable cost.
‘Businesses must leverage their data to improve finance options’
“We welcome any move that will make banks more accountable and which will increase competition and choice for SMEs. While these findings will go a long way to reforming SME lending, small businesses can already access responsible lending from the alternative finance sector, an area that the CMA point out in their report is growing rapidly. The next step is for business owners to leverage their business banking data, via technology, to further improve their alternative finance options.”
Meanwhile one of PwC’s banking experts, Isabelle Jenkins, lauded the CMA for its steadfastness. “The CMA has stuck to its guns and kept its remedies materially unchanged from the provisional measures it consulted on earlier this year. This is despite calls from challenger banks urging the CMA to take more radical action on capital requirements. While challenger banks are likely to be disappointed with today’s report as the CMA confirmed it will not carry out further analysis on this issue, they could yet see a more significant shake up from the PRA, Bank of England and the Treasury.
‘A more level playing field needed’
“The CMA’s proposal for an open Application Programme Interface (API) standard, which would give consumers access to more information from banks, is at the heart of its package of remedies. FinTech firms are potentially one of the winners here, but the ambitious timescale for the project means implementing it, and the CMA’s other measures, could be challenging and costly for banks. This package of measures will go some way towards addressing customer apathy towards bank account switching. But there needs to be a more even playing field between established banks, challengers and FinTech firms for the full benefits to be passed on to consumers.”
Meanwhile, Nic Beishon,head of commercial at Equifax UK, a provider of business insight, said: “The CMA’s order to improve SME lending services is a much-needed step to increase competition.
“We are in an uncertain environment for the UK economy and all moves to support our smaller businesses should be welcomed. Mark Carney has given banks ‘no excuse’ not to pass on rate cuts, and the CMA’s moves will help ensure that SMEs can borrow at the most competitive rates available.
‘Access to lending is vital’
“These tools will bypass time-consuming paperwork and make it much easier for SMEs to find out if they’re eligible for loan. By speeding up the decision making process, and providing an early indication of interest rates, SMEs will be much more likely to shop around for the best deals.
“The banks covered by the order need to prioritise implementation to make sure they have the right processes and technology to support robust lending decisions under the new regime. While only four banks are obliged to introduce the tools at this stage, we believe that other lenders, including challenger banks, should introduce the same tools to ensure their offering stacks up against larger players.
“Access to lending is vital to support the growth of SMEs, yet the CMA found that less than 20% of SMEs have a loan. Increasing the uptake will enable more businesses to invest for the future.”