The latest Payments Council figures on the number of consumers who have switched bank accounts show a 7% increase in the past 12 months. The figures, although showing a decrease from 2012, could indicate the beginning of a new era in UK retail banking.
While the system that enables consumers to change account providers in seven days rather than 30 is a welcome development, the service itself will not drive people to change accounts.
The latest figures show that from 1 April 2014 to 31 March 2015, 1.14 million account switches took place, compared with 1.06 million in the same period a year earlier.
But a closer look at the figures reveals this 7% increase masks a decrease from the time before the seven day switching service was available.
While the number of account switches in 2014 was higher than those in 2013, it was still lower than the 2012 figure.
Many consumers see no point changing bank when there is little differentiation between current accounts.
The high street giants are responding. Barclays is now offering customers up to £180 a year for banking online and using its mobile banking app.
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Other banks, such as Santander, are offering attractive interest rates on current accounts.
The combination of new competition, traditional banks offering genuine differentiation, a government-backed account comparison tool, and knowledge of the seven-day switching service amongst consumers could stimulate an acceleration of account switching.
The current account comparison site from Gocompare.com, which was announced by the government in the Budget, uses Midata, to give consumers access to their personal electronic data and helps them make informed decisions about which service providers to use. This can be used by the Gocompare comparison site to match people with a current account that suits them.
Meanwhile, the Payments Council said by the end of March 2015 more than seven out of 10 (71%) people in the UK were aware of the Current Account Switch Service, up from 58% in September 2013.
One senior UK banking IT professional said banks face major changes to their industry, whether they like it or not.
“I am sure we are at an event horizon with the big banks,” he said.
Gareth Lodge, analyst at Celent, said it is great to have an effective system underpinning the rule but it would not stimulate more account switches.
“The issue is there is very little to be gained from switching accounts because banks offer pretty much the same current accounts,” said Lodge. “This may be a Rolls Royce switching technology but the real issue has not been addressed.”
The latest World Retail Banking Report (WRBR) from Capgemini and French retail banking association Efma said customer experience levels at banks have failed to improve for the second year in a row, making customers more likely than ever to leave their bank.
The report said the percentage of customers likely to leave their primary bank in the next six months rose to double digits in every region except western Europe. Less than 50% of those born from the early 1980s to the early 2000s said they were likely to continue with their primary bank in the next six months.
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