FCA has published a paper on the purpose and scope of its review of the business models used in the retail banking sector. It is now considering what evidence it can best gather to understand:
- the state of competition and conduct in the markets;
- how free-if-in-credit banking is paid for and its effects on different types of consumers; and
- the impact of changes such as fewer branches and more use of technology on business models.
The first stage of the review will look at the supply side. FCA is looking to understand what areas of business are profitable and the pattern of profit distribution. It wants to look at inter-relationships and cross-selling against how revenues and costs are linked between business areas, and look in depth at PCA profitability. This phase will also include comparing traditional and emerging business models, and will encompass banks, building societies and credit unions.
Phase 2 will look at wider products, including mortgages, lending and insurance.
FCA plans its next update in Q2 of 2018, when it will present preliminary conclusions.