MPs are proposing allowing personal bank account holders to take their account numbers with them in the same way mobile phone owners can keep their number when switching providers, but bank bosses have dismissed the scheme as too costly.
In a wide-ranging report on competition in the banking sector released at the weekend, MPs on the treasury select committee found that very few bank account holders switched banks. This suggested to them there was little competition between the banks.
Former communications regulator Sir Donald Cruickshank told MPs that telecommunications companies had warned of high costs, technical difficulties and other obstacles when Ofcom wanted them to make it easier for customers to switch suppliers and take fixed and mobile numbers with them.
"In each case the estimates of the cost were huge," he said in evidence. "You could get an engineer sitting in front of a body like this demonstrating how expensive it was going to be. However, if you drive it through, that same engineer is delighted to have the challenge and the costs are trivial."
Cruickshank added, in today's world, engineers should be able to deliver (number or account portability) very easily. "I would go further: they should be able to deliver it in ways that are cost-saving for the bank, as well as service improving for us," he said.
Engineers would "relish the challenge", he said. Changed systems could deliver other benefits such as credit card transactions at cost, but improving the dynamic of the market for current accounts would be key, he said.
MPs found many of the so-called challenger banks supported account portability. Virgin Money CEO Jayne-Anne Gadhia said customers would feel more confident if they could simply move their account number to her or to Metro and know that all their direct debits and standing orders moved with it.
She dismissed objections that it was technically difficult or too expensive, saying, "If we can give everybody a single national insurance number, and we've been able to do that for decades - we can change everybody's telephone number whenever they want to change between phone providers - we should be able to change people's bank accounts."
Metro Bank vice-chairman Vernon Hill initially said there could be problems due to differences in IT systems, but he believed account mobility was possible, that it would give customers more freedom of choice and that the bank "urged" MPs to explore the option.
Office of Fair Trading CEO John Fingleton said there was a difference between phone numbers, which customers want lots of other people to be aware of, and bank account numbers, where the opposite was true.
Fingleton told MPs his "intuitive hunch would be that it could be very costly and not worthwhile doing it in the short term." He said number portability would not be his "top priority" in the "next year or two", but he was "attracted to it as a long-term vision for the market", possibly from 2020 or 2025.
MPs said mainstream bankers were less supportive of portability, saying consumers would have to bear the cost. Barclays CE for global retail Antony Jenkins said the technology existed to create a portable account, given enough time and money. However, the cost could run to hundreds of millions, probably billions.
Outgoing Lloyds Banking Group CEO Eric Daniels agreed it was possible to create a portable account, but doubted the cost-justification. RBS group CE Stephen Hester said the benefits of account portability, which he described as "the incremental ease of switching" would be "outweighed by the disbenefit", which he said would be "massive".
MPs said how banks achieved account portability was secondary. "What matters is that switching should be simple and safe," they said.
Banking consultancy Cut Loose said the present BACS system could be and was used to reroute regular payments to the customers' new bank using Vocalink's ToDDaSO (Transfer of Direct Debits and Standing Orders) service. More could be done, it told MPs.