On Wednesday 27 June, the Financial Conduct Authority (FCA) published an update on its wide-ranging strategic review of the retail banking sector. Throughout this phase of the review, Oxera has advised the FCA on the use of innovative approaches to business model analysis to shine a light on the regulator’s key areas of interest. These include the economics of personal current accounts; the potential impact of new technology; Open Banking and PSD2; and the developing competitive dynamics in the retail banking market.

Business model analysis provides a robust framework for assessing the drivers of competitive advantage, evaluating the relative importance of different banking activities. Key findings are drawn not just from examining the larger banks, but also from comparisons with smaller banks and building societies, as well as other ‘challengers’ in this market. This has informed important FCA findings, such as on the broader role of personal current accounts in the business model—which led Andrew Bailey, FCA Chief Executive, to conclude that ‘there is no such thing as free banking’.

Innovative business model analysis like this is a powerful tool for both regulators and firms across many sectors, revealing the fundamental drivers of competitive outcomes and thereby illuminating the key trends going forward.

You can find out more about this topic in the FCA Strategic Review of Retail Banking Business Models Progress Report.