Response by the Campaign for Community Banking Services (CCBS) to the report of 14 March 2003 to the OFT by the major banks

• At variance with the recommendation of the Competition Commission, the banks’ study focused almost exclusively on the issue of access to existing branch networks as a barrier to the entry of new banking providers to the small business market.
  
  
• The main issue of competitive choice amongst the Big 4 banks for branch dependent businesses (and individuals) at a local level was barely touched on.
  
  
• Unsurprisingly, the study confirmed what was already known i.e. that potential new players are few and have no interest in “branch dependent” small businesses, which they see as costly to service. Also, they see little merit in exposing their customers to a competitor bank’s marketing experience on regular branch visits.
  

Main issue not tackled

• While opinion was sought from existing and potential banking providers, no market research was carried out with branch dependent, branch using small business customers of the Big 4 in areas with no (or restricted) convenient choice of bank: a market segment likely to increase substantially when the banks recommence the inevitable network reduction programmes.
  
  
• Where the 132 page study briefly mentions the principal problem (pages 50/51), inserted into the report as a result of external pressure, it dismisses the need on the basis of what appears to be incomplete data. Confidential network analysis made available to the study by one of the Big 4 suggests only 240 (out of 1600) “financial centres” in England & Wales with no competitive choice of bank: CCBS believes this is understated as a similar number of “no choice” sites at the other 3 banks would increase the figure fourfold.

Inter Bank Agency Arrangements

• Even the study’s examination of the existing, under publicised and therefore under-used, Inter Bank Agency Arrangements (IBAAs) is undertaken largely from the perspective of potential new entrant banking providers. However, the strong message from that quarter that it would not encourage the use of IBAAs as it exposes customers to competitive marketing is the same principal obstacle to greater use by other members of the Big 4.
  
  
• The report’s conclusion that the benefits of IBAAs are not widely known is correct but the remedies proposed are totally inadequate. Pricing, process improvement and automation all need attention but posting availability information on bank and banking industry websites is not focused enough for potential small business beneficiaries who have little time to ‘surf the web’: the message of customer convenience needs to be pro actively included in the promotional literature, staff training and branches of the account holding banks. CCBS fully accepts, however, that for money laundering and capacity reasons there has to be an application and approval process for business users: transaction levels and volumes could be capped in relation to the cost-effectiveness of alternatives such as security company collections and deliveries.

Post Offices

• The report seriously overstates the Post Office network’s capacity to take on business banking counter traffic from the Big 4 without substantial investment in improving premises, security and staffing at post office sites in the bigger and busier communities with no, or limited, banking representation.

CCBS Solution

• Neutrality, identified by the study as an important requirement is at the core of CCBS’s proposals for a network of neutral multi-bank access points. These would include selected suitable post offices as well as other types of directly managed and partnership outlets to serve many of the communities without banks as well as those with no choice of banks. (The banks’ study did not examine this option.)

17 March 2003
(Revised 8 April 2003)

CONTACT:
Derek French
Hon Director
01582 764760