Small businesses warn Covid could ‘derail’ progress in banking competition

Small businesses in Scotland have welcomed increased competition in the retail banking market since 2018, but warn that progress risks being disrupted by the big banks’ focus on emergency lending during the crisis. Covid-19 crisis.

The Financial Conduct Authority (FCA) said yesterday that greater competition in retail banking is driving choice and lower prices for consumers and small businesses, despite the impact of the pandemic.

In an update to its 2018 review of retail banking, the city watchdog said the historical advantages of big banks remain strong. However, he said those advantages were beginning to wane due to digital innovation and changing consumer behavior, adding that persistently low interest rates were limiting banks’ financial returns.

Its review also found that the share of retail and micro-business current accounts held by digital challengers increased between 2020 and 2021 while large banks saw their share fall – even as large lenders lent proportionally more to digital challengers. micro-enterprises during the pandemic.

Digital innovations by banks and their customers, which accelerated during the crisis, have also proven to have improved service quality and satisfaction, especially for mobile and app users.

However, concerns have grown in recent months over reduced access to cash and branch services, as major banks have continued to cut the number of branches amid the pandemic.

Asked to comment on the review update, Colin Borland, director of decentralized nations at the Federation of Small Businesses, told the Herald: “It has been nice to see increased competition in the small business banking market in the UK. -United. However, the concentration of government-backed emergency lending among the biggest banks over the past two years threatens to derail some of that progress.

“The use of cash has obviously been hit hard in recent years, but the FSB is of the view that we need to secure its future.

“This will require banks, regulators and government all to play their part. It cannot simply be about imposing new obligations on retailers who are already under pressure on this front due to the closure of bank branches and ATMs. »

Kate Collyer, Chief Economist at the FCA, said: “Competitive pressures and innovation are starting to pay off for retail banking customers, with greater choice, lower prices and more convenient ways to shop. carry out their banking transactions.

“But changes that can benefit many of us can also pose a risk to those in vulnerable situations, which is why we have put in place guidelines on closing branches and ATMs. We are also consulting on a new requirement for consumers to set higher expectations for standards of care provided by businesses.

“Our research clearly shows the impact of the steps we have taken to reform the overdraft market and protect those financially impacted by Covid.”

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