The seven-day Account Switching Service was launched almost two years ago with much fanfare however we are still seeing only a minority of people moving their current accounts to a new provider. According to statistics from Bacs and the Payments Council,
1.3% of personal current accounts have been switched in the past year, and 2.1% since the start of the switching service in September 2013. And from the statistics it looks like 30% fewer of us make the change around Christmas.
The perks of being a switcher
Banking brands have reacted with a spate of cash incentives, generous voucher offers and even preferential interest rates that beat most savings accounts on offer. We have even seen some new players really push the boundaries of creativity with the incentives,
such as free dog biscuits for canine companions.
These offers have been backed up by extensive advertising campaigns from both the banks promoting their individual accounts and the Payments Council advertising the Seven Day Current Account Switching Service. And yet take up remains low. Our recent research
looking into the attitudes around current account switching has uncovered some perhaps surprising findings. When those who hadn’t switched account were asked why, two thirds stated satisfaction with their current provider to be their main reason for staying
put. Other reasons for not switching included; incentives not being big enough, the amount of hassle switching involved, or the account holder simply couldn’t be bothered.
Making it easy
There has been much focus on making the transition to a new current account easy and the Seven Day Account Switching Service has certainly gone a long way to streamline and remove the anxiety out of changing current account provider. Much effort has gone
into adapting the banking infrastructure to cope with added complexity in payment routing as people transition from one banking provider to another.
With the entrance of new competitors into the market in the form of ‘challenger banks’ we may see even better incentives to switch and increased competition. Having set their stall out with all kinds of tempting incentives, banks and the industry in general
must back it up by making sure that the transfer process is as fast, efficient and simple as possible.
Currently the UK’s payments system, re-routes Direct Credits and Faster Payments to switched accounts. This is a limited time service and care must be taken that when the service comes to an end, so that those who have switched account don’t suddenly find
payments failing -several years after they made the move. There are some payment mechanisms that are not transferred on account switching, for example continuous authorisations on debit cards. This can come as a surprise to account holders expecting all payments
to continue as expected with their new account.
One suggested solution to deal with the process is portability of account numbers. If this were implemented, people could move their account to a new bank while keeping the same bank account details such as account number and sort code. It’s likely that
this would require significant and costly changes to the banking infrastructure – particularly with payments routing. At present with only 15% of those asked stating ‘hassle’ to be a reason for not switching account, more investigation should be undertaken
to determine whether account number portability would deliver the desired increased mobility in the personal current account market.
The challenge for banks is to adequately differentiate their offerings from those of their competitors and make them attractive enough for account holders to make the leap. The advent of the challenger banks with their new age banking platforms and innovative
offers may well be the impetus to make this happen. The banking industry will then need to deliver the switching experience today’s customers expect.