Nearly 20 leading organisations from alternative finance have sent a joint submission, drafted by The Finance Innovation Lab, to the investigation into retail and SME banking to be undertaken by the Competition and Markets Authority. The group, including the P2P Finance Association, UK Crowdfunding Association, Nesta, Zopa and Move Your Money, has called for the CMA to pay particular attention to fostering greater diversity of business models in the markets for current accounts, small business lending and personal deposits.
The Competition and Markets Authority terms of reference is to look at possible barriers to competition in banking on current accounts and small business accounts, and the CMA has considerable powers to restructure the marketplace should it conclude that such barriers do exist. The investigation will last until 2016 but the risk is that it becomes too narrow and simply looks at how to encourage new entrants using the existing plc banking model. This would be a missed opportunity to drive greater diversity into financial services.
The most promising ways of delivering competition in this marketplace could actually be new payment providers, peer to peer lending, community finance institutions, local banks and more mutuals. The submission makes the case for a broad interpretation of competition in order to really address some of the barriers that currently prevent these promising business models from challenging the status quo.
This call for using the CMA Investigation as a means to create diversity in the finance sector is also one of five policy recommendations being targeted at the main political parties by the Transforming Finance Network of civil society organisations in the run up to the 2015 General Election.