Britain's banks must cap the fees they charge on unauthorised overdrafts and join a price comparison website to improve customer service, Britain's competition watchdog said today.
The UK's Competition and Markets Authority (CMA) said bank charges were too complicated and many customers and small businesses were unaware if they were getting good value for money.
Most stay with the same lender for over a decade.
As its 19-month review of the retail banking sector moved towards conclusion, the CMA proposed making it easier to move accounts by forcing banks to introduce technology so their customers' accounts history can be shared easily with rivals.
The proposals should end overdraft "bill shock" by helping customers identify better deals that could allow them to make average savings of £116 a year, the CMA said.
Regulators and lawmakers are keen to increase competition in a sector dominated by the country's biggest four lenders - Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC.
These four lenders control more than three-quarters of current accounts and provide nine out of 10 business loans.
But the CMA recommendations disappointed some consumer groups, who had hoped for deeper structural changes.
"This inquiry achieved little more than to propose basic information measures that the big banks should have introduced years ago," said Alex Neill, Director of Policy and Campaigns at Britain's largest consumer body Which?
"The chance to deliver better banking for all consumers has been missed," he added.
The UK's CMA decided against more radical measures such as ordering an end to free banking for customers in credit or breaking-up the largest players, because it said it would not solve the problems of competition.
Instead it focused on "nudging" customers and businesses into being more pro-active in their choices by clarifying what is on offer.
"Having more and smaller banks, which customers still couldn't easily choose between because of lack of transparency on fees and charges, would not significantly improve the market or give customers a better deal," the report said.
Philip Marsden, a member of the CMA's panel, said the open banking standards will allow "fintech" companies to make banking less opaque and change the market's structure.
"We would expect far more switching of accounts," Marsden told Reuters.
A slew of new and niche "challenger" banks are bidding to poach market share from the biggest lenders. They include Secure Trust, Virgin Money, Aldermore, Shawbrook and Metro Bank.
Rishi Khosla, the founder of challenger lender OakNorth Bank, said small firms suffered more from a lack of specialist available loans rather than poor price transparency.
"New banks’ ability to highlight to customers how their offering compares with the current deals in the market is not the issue, but rather the fact that we face significant barriers to compete effectively against the incumbent banks," he said.
Stakeholders have until June 7 to submit feedback on the measures before a final report is published in August, with the remedies in force by early 2017.
