The Payments Council has lauded a system to make switching current accounts easier as it approaches its first anniversary, but figures reveal banks need to do more to differentiate.
The regulator reported a 19% increase in the number of accounts switched in the 11 months since the service launched in September 2013.
The payments council also revealed 70% of the public are now aware of the new service, 61% are confident in what the new service is and how it works, and 88% of consumers who have switched accounts felt there was little effort involved on their part.
But was it worth the investment? The service was launched in September last year. In the first eleven months of its operation, from 1 October to 31 August, 1.1 million account switches have been made – an average of 100,000 a month.
If that rate continues in September, the number of switches in the 12 months will be 1.2 million, which shows no change on 2012, when there were 1.2 million current account switches. This dropped in 2013 when there were 1.02 million.
Gareth Lodge, a financial services analyst at Celent, said the seven-day account switching service is a positive move, but there has been no real increase in the number of people switching.
He said this means the Banking Commission cannot point to the difficulty in changing accounts as being the reason people do not change their bank. Rather it is the fact that banks do not differentiate that is stopping people switching.
He said the IT system that was already in place had the capability to process switches in seven days but it was the banks that slowed things down.
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He said people are talking about how Santander has won lots of customers for its current account as an example of the switching service’s success, but this is more to do with the competitiveness of the account.
“This is a spurious correlation because Santander has only recently launched the account," he said.
The regulation, introduced by the Banking Commission, aimed to simplify and speed up the process of changing bank account providers for consumers, small businesses and charities. It meant slashed the time of the previous process - where switching accounts could take up to 30 days - to seven days. But figures suggest it was not the 30-day process that was putting people off, but the fact that there is little point in switching accounts.
The Payments Council is not focused on increasing how many people switch accounts, but hopes the availability of the system and the awareness of consumers will drive banks to offer more by increasing potential current account competition.
“The current account switching service is a fantastic example of the power of collaboration and shows what can be achieved when highly competitive businesses put aside their differences to work together for the greater good.” said, Gerard Lemos, executive chairman at the Payments Council.
“The service was designed to make life easier for customers by removing barriers to switching, with the aim of boosting competition in the banking sector. It’s clear from reviewing its very first year that it’s made great ground – empowering customers with the ability to switch their bank account easily and quickly if they choose to do so.”