The Financial Conduct Authority (FCA) has released proposals to compare the service levels available for business current accounts.

The FCA proposals will require firms who offer current accounts to reveal what it takes to get a business account up and running, how and when various transactions can be carried, and the time taken to replace a debit card. Account providers will also be required to state the number and type of major operational or security incidents.

The regulator said the proposal would make information for consumers easy to access and compare providers, and that they would be available for use by comparison services. The FCA expects the findings to drive increased competition between firms to offer improvements in service quality.

The proposals form part of a wider look into retail banking which includes action of five recommendations made by the Competition and Markets Authority (CMA) in 2016.

It must be generally a good thing if UK SMEs are to receive better service from their banking providers. It will certainly mean a more effective banking system and perhaps better prospects for growth in the small business market.

It might mean a squeeze on margins for some invoice finance providers however if businesses have better banking facilities.

And if the general banking ecosystem is better, leasing businesses are going to have to improve at the same time so that prospective leasing business does not get swallowed up by improved SME overdraft facilities, which is often one of the findings of challenger bank surveys in this area.

As the Asset Based Finance Association revealed earlier this year, the amount of outstanding bank overdrafts decreased by 2% to an average £12.4bn last year, down from £12.6bn in 2015.

This is still a sizeable portion of lending that the leasing market could target to add to its total lending figures.

If SME banking becomes less onerous, that figure may rise, and lessors could find migratory business, previously handled by leasing businesses, moving back to business banking overdrafts.

The industry has made large gains since 2015 in publicising its existence to SMEs and advertising the benefits of the leasing product.

The other recommendations from the CMA include increased transparency regarding overdrafts and a more competitive market for small business.

With greater competition, comes greater risk of lost business.

 

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