The UK’s Competition and Markets Authority (CMA) has announced a set of reforms that embrace new technology and push retail banks to make it easier for smaller businesses to manage their finances and switch banks.

The measures, which come following an investigation into the retail banking sector that revealed customers are paying more than they should and not benefiting from new services, also aims to help new banks to compete with larger, established ones.

A key measure is the requirement for banks to implement Open Banking by early 2018. Open Banking will enable customers to share their data securely with other banks and manage their accounts with multiple providers through a single digital platform. This will allow them to take more control of their funds, for example by avoiding overdraft charges, managing cashflow, and by also being able to compare products.

Banks will also be required to publish trustworthy and objective information on quality of service on their websites and in branches, as well as sending out routine ‘prompts’ to remind customers to review the services they have and switch banks if it’s not the best deal.

“Our central reform is the Open Banking programme to harness the technological changes which we have seen transform other markets. We want customers to be able to access new and innovative apps which will tailor services, information and advice to their individual needs,” says chair of the investigation, Alasdair Smith.

“We are also taking measures to give customers much greater control over their overdraft charges, so that they are clearly told when they are about to be incurred and have an opportunity to avoid them. Alongside this, banks will have to cap their monthly charges for unarranged overdrafts.”

The report highlighted that banks make around £1.2bn a year from unarranged overdraft charges and that small businesses lack tools providing comprehensive information about bank charges, service quality and credit availability.

The CMA says it will “throw its weight behind the independent charity Nesta in a new initiative to put this right”. Banks will need to provide Nesta with financial backing and technical support, alongside introducing a range of other measures targeted at small businesses such as a loan eligibility tool.

The CMA’s reforms received mixed reviews from the industry.

CEO at British Banking Associations, Anthony Browne, commented: “Customers and businesses have already found digital banking hugely convenient and have taken advantage of mobile technology that is allowing us to bank round the clock. We are pleased the CMA has reflected that in its recommendations.

“However, we recognise more work needs to be done to create a level playing field by supporting new banks wanting to set up business, as well as helping to grow established banks.”

 CEO of Metro bank, Craig Donaldson, said: “After more than two years in the writing and costing several millions of pounds, we are astonished that the CMA’s findings do not attempt to level the playing field for new entrants and challenger banks, by recommending that the PRA looks into disproportionate capital requirements. Disproportionate capital requirements are anti-competitive and unduly support the large incumbent banks by allowing them to hold up to 10 times less capital for the same loans than challenger banks.

“The CMA was given a rare opportunity to support and develop competition in banking, it is disappointing that they decided not to get at the root of the problem, but rather they missed the point and tinkered around the edges.”

The Federation of Small Businesses (FSB) says: “FSB is deeply concerned about the worrying pace of branch closures and the impact this is having on some small businesses’ ability to make informed banking decisions, particularly in rural areas. Unfortunately, 2016 is already looking like a record-breaking year for closures.

“The long-awaited final recommendations from the Competition and Markets Authority (CMA) on changes to the retail banking sector are a promising step for small businesses and should be swiftly put into action.”