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9 Factoring is the purchase of business trade debts. In this market the merger would give Lloyds a 49 per cent share, the next largest competitor being a subsidiary of Natwest with 17 per cent.
10 In merchant acquiring (the processing of receipts for credit and debit card transactions on behalf of retailers and card issuers) the "Big Four" are dominant, with Lloyds and Midland together accounting for between a quarter and a third.
11 By far my most serious concern however arises in the market for lending to small businesses, defined as those with a turnover of less than £l million p a (about three-quarters of all businesses are in this category). The "Big Four" are much the largest group of suppliers - with about 85 per cent of all small business lending. The estimates of market shares suggest that in England and Wales, Lloyds and Midland together have about 30 per cent of this market.
12 A reduction in major providers of lending is clearly a cause for concern. Last year my Office received a large number of complaints (notably from the small-business sector) about excessive charging, tightening of lending, and general "high-handed" behaviour by banks. After examining the complaints I found no evidence of collusion or other anti- competitive practice, but I commented that I was nevertheless concerned about the volume of complaints on hidden or opaque charging, lack of notice of changes, reduction of facilities at short notice, failure to act upon informal agreements or to meet customers' reasonable expectations, and other examples of insensitive or high-handed behaviour.
13 Unlike lending to large companies (where overseas banks play an important role) this is a more difficult market in which to get established. To compete effectively it is necessary to have a large branch network, suitably staffed and supported by computer facilities, and to develop a close relationship with, and understanding of, the local small business community. The local branch manager is a vital link in the process of understanding and supporting lending to small firms. Under present legislation building societies may, for the most part, only lend unsecured to personal customers (and then only to a limited extent) although this restriction does not apply to the Abbey National or TSB. However the Abbey has not entered this sector, and the TSB has found it difficult to expand. Some smaller banks (eg Yorkshire) do provide competition in some localities; but their share of the market nationally is insignificant.
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