Interim findings from the latest FCA research suggest that banks are paying lower interest rates to customers on savings accounts because consumers are failing to shop around, staying put with poorly-paying accounts for many years.
The FCA is planning to look at ways to stimulate competition in the cash savings market to encourage consumers to shop around and get the best deal.
Christopher Woolard, director of policy, risk and research at the FCA, said: "Our preliminary view is that while some aspects of the cash savings market are working well competition does not appear to be working in the interest of many consumers.
"In this market there is a minority of very active, very engaged consumers who regularly change provider to get the best deal. We want to look more closely at what is inhibiting the majority of consumers from getting better deals."
When conducting market studies, the FCA is looking to find a market in which informed consumers are able and willing to take advantage of the best products for them, with firms actively competing to win business by improving the products they offer. The FCA says that the largest personal current account providers are able to attract a large proportion of easy-access deposits despite on average offering lower rates.
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The FCA will now undertake further research before taking a view on whether it should intervene to ensure competition is working in the interests of consumers. As well as considering the feedback to its initial findings, the FCA will look at the extent to which it might be able to promote greater consumer engagement, including:
• what could be done to ensure that more consumers are aware of the rates they receive and the rates on offer on other accounts;
· what information customers are given when rates are changing;
• whether it is possible to give consumers greater insight into how their interest rate is likely to evolve over time, especially after any introductory offer ends, so that they can make an informed medium-term choice between providers when opening an account;
• what could be done to make it easier to move savings to a new provider; and
• whether other interventions may be necessary to improve outcomes for customers overall.
The final report into cash savings will be published in late 2014.