The UK's current account switching service (Cass) has failed to produce a significant increase in the number of people moving banks, according to the Financial Conduct Authority (FCA), which says that a move to full account number portability could prove a more effective approach.
Introduced in September 2013, the current account switching service was designed to make it easier and quicker for Brits to move their bank provider, boosting competition. The service, which cost the industry in the region of $750 million, was recommended by the Independent Commission on Banking, which had originally looked at full account number portability, which would have cost anything up to £5 billion.
Data from the Payments Council - the bank trade body in charge of the service - suggests that switches using the new system almost always go without a hitch and within the seven day timeline. In addition, satisfaction among users - both consumers and SMEs - is high.
However, uptake has been unspectacular. Over the first 12 months of Cass's existence there was a 22% increase in switching volumes. But since then volumes have fallen back, and by January were only 16% higher than when the service was launched and a measly two per cent up on the pre-Cass peak.
The disappointing take-up is largely down to a lack of awareness of and confidence in the system, says the FCA. Although the Payments Council recently claimed that 69% of consumers were aware of Cass, the FCA's own research found just 41% were. Meanwhile, the biggest fear among potential switchers is that something will go wrong during the move. To address this, the FCA is recommending a targeted marketing campaign to publicise the high level of satisfaction among users.
With awareness, confidence and a general inertia among the public the main reason for a lack of take-up, the FCA has rejected the idea - floated by George Osborne - of cutting the switching time from seven to five days, concluding that this would not address the problem.
A more dramatic and expensive alternative would be a switch to full account portability, letting customers keep their account numbers and sort codes after moving provider. This is attractive to a "significant minority" of people, says the FCA, and would increase confidence in a smooth, error-free switch.
The FCA report floats two potential models for delivering account portability: building it within the existing market structure and then running the additional infrastructure centrally, as is the case with Cass; or a new central utility model based on a shared platform.
The second idea may "provide an opportunity for investment in a new operating system, but it is not clear what incentives a single utility (effectively in a monopoly position) would have to either keep pressure on costs or to innovate in the longer term. This model might also make it more difficult or slower for innovation to occur at the individual bank level (eg if there was inflexibility in the central solution or banks had to queue up for development slots). However, it could also provide a common access platform for challengers."
The FCA says that it is now passing on its work to the new Payment System Regulator, which is setting up a forum to develop strategic priorities for the industry.
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