Britain’s competition watchdog has published its final recommendations for boosting competition in high street banking, its measures not differing significantly from options it published in May to widespread dismay among consumer groups.

The government and regulators have already taken steps to boost competition in a sector dominated by Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC, which control more than three-quarters of current accounts and provide nine out of 10 business loans.

The Competition and Markets Authority said older and larger banks don’t have to compete hard enough for customers’ business, and smaller and newer banks find it difficult to grow.

“This means that many people are paying more than they should and are not benefiting from new services,” the CMA said in its final report yesterday.

In what the watchdog called its central reform, banks will have to implement “Open Banking” by early 2018, meaning “new and innovative apps” to accelerate technological change.

It also said that banks will have to set a monthly cap on unarranged charges, and tell their customers about it. Banks make £1.2 billion a year from unarranged overdraft charges.

Consumer groups had wanted a tougher approach with regulators, rather than the banks, setting the cap.

The CMA hopes its “remedies” will make it easier for personal and small business customers to switch lenders.

At the moment only three per cent of consumers and four per cent of business customers change banks in any year.

“The reforms we have announced today will shake up retail banking for years to come, and ensure that both personal customers and small businesses get a better deal from their banks,” said Alasdair Smith, chair of the CMA’s retail banking investigation.

The CMA’s draft proposals in May also disappointed new entrants in banking known as challenger banks which are bidding to poach customers from the biggest lenders. These include Secure Trust, Virgin Money, Aldermore, Shawbrook and Metro Bank.