In a speech at JPMorgan Chase, U.K. Chancellor of the Exchequer George Osborne revealed the government plans to increase competition in the domestic payment industry by reducing the power of the big four banks which currently handle 75 percent of all checking accounts.
In the wake of widespread anger at the leading financial institutions from the general public, the ruling coalition government has brought forward banking reform legislation that will force traditional banks to become more competitive by granting customers more rights and power to change accounts. According to Osborne, the government will, “will bring forward detailed proposals to open up the payment systems. We will make sure that new players in the market can access these systems in a fair and transparent way.”
Improving competition is not the only measure the British government is taking. In response to continual illegal actions by leading banks, the government is stepping up regulation of the industry, including two new oversight bodies, The Prudential Regulation Authority and the Financial Conduct Authority. The former will oversee financial firms and the latter will ensure consumer protections.
While consumers in the United States can easily move to different financial institutions and have plenty of options, counterparts in the U.K. are more restricted both in terms of leaving and the number of other financial institutions available. By improving the competition in the domestic payment industry, consumers will greatly benefit and the liberalization of the market opens up intriguing new options for members of the international payment industry interested in entering a highly developed and mature market.
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