Northern Irish banking customers may be paying over the odds for their personal accounts because of a lack of competition, a report revealed yesterday.
The UK's Competition Commission found, in a preliminary report, that there may be significant barriers to entry and expansion in Northern Ireland's banking market, which is dominated by Ulster Bank, Northern Bank, AIB-owned First Trust and Bank of Ireland.
"From the evidence we've seen so far, it appears that, despite changes by some - but not all - of the banks in their products and prices, competition in the area of personal current accounts in Northern Ireland is not fully effective," said Christopher Clarke, chairman of the inquiry into the market.
"As a result, some personal current account customers may be paying more in charges and in a wider range of circumstances, and may be receiving lower interest when their accounts are in credit than might be expected in a competitive market."
Just a small number of Northern Irish customers switch their current accounts, mostly because they think it is difficult, time-consuming, risky and of little benefit to them, according to the commission's findings. Customers also have a high level of loyalty to their current bank and are concerned about the impact of their long-term banking relationship if they switch to a rival, Mr Clarke said.
"They also see little difference between the products offered by the individual banks and, given the complexity and lack of transparency of their banks' products and charges, customers find it difficult to make comparisons between them," the inquiry chairman said. "It also appears that this low level of switching may allow the banks to charge higher prices than would otherwise be the case."
While the combined market share of the four clearing banks has fallen in the past five years in volume terms, not all the banks have lost share. When measured by value, the decline in the main banks' share is "much less significant", the commission found.
However, some banks have changed their products and prices in response to the increase in the market share of rivals among non-clearing banks.
The Competition Commission will consider over the next few months whether these changes came as a result of greater competition in the personal account market or are merely temporary.
The commission stressed that the purpose of its report was to share its thinking on the Northern Irish market and that it has yet to reach any conclusions on the state of competition there. It plans first to take into account further evidence from the banks concerned and other interested parties, and aims to publish its provisional findings report in the early autumn.
The preliminary report on personal current accounts in Northern Ireland comes two weeks after the European Commission warned that businesses and consumers in the European Union were paying too much to use credit cards such as Visa and MasterCard.
