The Competition and Markets Authority (CMA) has unveiled a package of measures designed to ensure banks work harder for customers by making the most of the benefits of smartphone technology.
A retail banking market investigation published by the watchdog today (August 9th) found that older and larger banks are not competing hard enough for customers' business.
This, combined with the fact that smaller and newer banks are finding it difficult to grow, means that many people are not benefiting from new services, in addition to paying more than they should for traditional services.
With regard to the possibilities of mobile banking in particular, it was noted that smartphones can be used to help customers reduce their exposure to unarranged overdraft charges.
Banks currently make around £1.2 billion a year from these fees, but under the terms of the new CMA rules, they will be required to send alerts to customers who are about to enter an unarranged overdraft.
They will also have to inform them in advance of a grace period that could help them avoid these charges altogether.
Research carried out by the Financial Conduct Authority reveals that this type of alert – when combined with mobile banking – can heavily reduce overdraft charges.
Banks will also have to set a monthly cap on unarranged charges and ensure their customers are informed about the matter.
Chair of the retail banking investigation Alasdair Smith said this is a key reform, as this kind of smartphone technology has already transformed other markets.
“We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs,” he commented.
“We are also taking measures to give customers much greater control over their overdraft charges, so that they are clearly told when they are about to be incurred and have an opportunity to avoid them.”