On 20 January 2022, the FCA published its 2022 Final Report on competition in retail banking markets. This builds on the FCA’s 2018 Final Report and 2018 Progress Report.

The key findings in the 2022 Final Report include:

  • Large banks are in a strong position but face increasing competition, in particular for Personal Current Accounts (PCAs). There are signs that some of the historic advantages of large banks may be starting to weaken through innovation and digitisation and changing consumer behaviour.
  • Digital challengers have rapidly gained share in the PCA and Business Current Account (BCA) markets. Collectively, digital challengers now have around 8% market share for PCAs. They have attracted customers in part by offering innovative mobile apps which make the experience of banking easier and more convenient and to help consumers manage their money.
  • Competition in the mortgage market has intensified, which has caused yields to come down. In a market with high demand, and following ring-fencing, competition has intensified leading to falling yields across the mortgage book. Increased broker usage has led to lower levels of standard variable rate mortgages, further reducing yields.
  • Yields on consumer credit have also fallen, particularly on unarranged overdrafts. The FCA’s overdraft remedy came into force in April 2020 and caused a significant decline in unarranged overdraft yields. The pandemic has dampened demand for consumer credit overall as spending fell. The FCA intervened to protect consumers  with temporary support measures such as the payment deferral guidance.

The FCA will be discussing the points raised in the 2022 Final Report with firms and consumer organisations. It is also keen to hear from other stakeholders. Written submissions can be sent to the StrategicReviewofRetailBanking@fca.org.uk by 31 March 2022.

Kate Collyer, Chief Economist at the FCA, said:

‘Competitive pressures and innovation are starting to deliver for retail banking customers, with greater choice, lower prices and more convenient ways to bank. But changes that may benefit many of us can also be a risk to those in vulnerable circumstances, which is why we have put in place guidance on the closure of branches and ATMs. We are also consulting on a new consumer duty to set higher expectations for the standard of care that firms provide.

‘Our research clearly shows the impact of the measures we took to reform the overdraft market and protect those financially affected by Covid.’