The system that enables bank customers to switch current accounts in seven days is working well for those that have used it, but a lack of consumer awareness and confidence could mean a limited impact on the number of people who switch accounts.
With regulators demanding more choice in current accounts and approving new financial services companies by the score, consumer awareness and confidence in the seven-day account switching service is vital.
The seven-day account switching system, introduced by the Banking Commission, simplifies and speeds up the process of changing bank account providers for consumers, small businesses and charities, reducing the time it takes to switch account providers from 30 days to seven days.
A centralised system, built by Vocalink, makes sure all payments made to the old account are redirected to the new one. This ensures that payments will not be lost if old account details are used in error. The service operates on a new, custom-developed IT platform based on the ISO 20022 specification.
According to a Financial Conduct Authority (FCA) review, the system is working well but lacks consumer awareness and confidence.
Christopher Woolard, director of strategy and competition at the FCA, said more needs to be done to raise awareness. “Making sure the systems that already exist work well will help give consumers confidence that switching can be simple and error-free. More needs to be done to raise awareness of the tools that already exist to enable customers to move around.”
The FCA said awareness could be raised by more targeted marketing campaigns and publicising customers’ positive experiences. The lack of awareness is surprising given that, in January, the Payments Council said 69% of people in the UK are aware of the service.
Read more about retail banking switching
The regulator also said that if customers were allowed to change banks but retain their bank account numbers, it would be even more convenient. “There are various technical solutions to delivering account number portability, which involve different levels of cost and complexity,” said the FSA.
The Payment Systems Regulator will consider evidence in relation to account number portability.
The take-up of the switching service has not been a huge success because of factors outside its control. Latest figures from the Payments Council show there were 1.16 million account switches in 2014, up from 1.03 million in 2013. But in 2012, when the seven-day switching service was not available, there were more 1.2 million.
This proves that forces other than the efficiency of the system will influence the number of people who switch. A lack of real competition in current accounts is the real reason why there has not been mass take-up of the service.
Celent analyst Gareth Lodge told Computer Weekly last year that it is great to have an effective system, but this will not be the stimulator for more account switches. “The issue was not that it was difficult to change, but that there is very little to be gained from switching accounts because banks offer pretty much the same current accounts,” he said. “This may be a Rolls-Royce switching technology, but the real issue has not been addressed.”
However, the UK's banking scene is changing, with new banks being set up and gaining regulatory approval.These new firms are offering differentiation in the products they offer and their delivery through digital technologies.