Lacklustre rates and more branch closures: Are big banks becoming too big?

Four of the UK’s largest banks – Barclays, HSBC, Lloyds Banking Group and NatWest Group – control 75% of current accounts, but are they rewarding their customers’ loyalty?

With some of the UK’s biggest banks coming under renewed fire in recent months for offering uninspiring interest rates and reducing in-branch access, is it time to question whether these providers are becoming too big?

New analysis in INTEREST from Moneyfacts reflects on the continual poor value being offered to consumers by the UK’s ‘Big Four’ banks (Barclays, HSBC, Lloyds Banking Group and NatWest Group) in recent years as they profit from their near monopoly of market.

A history of low rates

In the wake of the financial crisis of 2008 and up until 2022, the average savings rate offered by UK banks was just 1.52%, according to INTEREST.  This is despite the average rate of UK inflation sitting considerably higher at 2.71% throughout the same period.

With many of the big banks using quantitative easing measures taken by the Bank of England during this time to justify offering meagre returns, finding a savings deal that could better inflation was a rarity.

As recently as April 2021, it’s revealed Barclays Bank paid an average of just 0.15% across its nine open savings accounts. Meanwhile, Lloyds Bank had 21 accounts with returns averaging 0.23%; HSBC, 25 accounts paying an average of 0.24%; and NatWest offering an average of 0.38% with its 19 open accounts.

Across these 74 accounts, their customers received average returns of just 0.26% in total, despite inflation at the time sitting at 1.5%.

This is a phenomenon that can still be seen today to an extent. Even though inflation slowed only slightly to 3.2% in March and the Bank of England base rate sits at a 15-year high of 5.25%, the ‘Big Four’ continue to each pay less than 2.00% on a selection of their easy access accounts*.

By contrast, the average easy access account paid a rate of 3.11% at the start of April, according to data from the Moneyfacts UK Savings Trends Treasury Report.

In a recent update on the implementation of its Consumer Duty, the Financial Conduct Authority (FCA) noted the failure of some firms to show that products offer fair value to retail customers.

“Some firms have relied solely on an assessment of similar product offerings in a market. This alone does not prove that the customer is getting a good deal. We also see statement being made about value, without any qualitative reasoning outlining why a firm considers that its products offer fair value,” the FCA explained.