The seven day itch?

The average Brit keeps the same bank account for 17 years, five and a half years more than the average marriage lasts, according to The Payments Council. From today (16 September 2013) however, regulatory changes mean the time it takes to switch bank accounts has been reduced from one month to only seven days. This makes it is easier for consumers to terminate unfulfilling bank relationships.

Although not quite the lengthy process involved with divorce proceedings, the previous 30 working days account switch was cumbersome and off-putting for consumers. The Payments Council says the quicker process should create ‘an era of account switching which will lead to greater choice for customers and wider competition in the market place’. With our research finding a third (30%) plan to switch their account as soon as the new seven-day rule comes into effect, banks can no longer rely upon consumer apathy to keep their custom.

As bank switching gathers momentum with consumers, there is a huge opportunity for banks outside of the traditional high-street suppliers to compete for consumers. In addition to typical financial and low interest rate incentives, there is also evidence that customers may make the choice to switch or stay based on the quality of the digital banking service their bank offers. One fifth of Brits for example, would move to Apple if it launched a bank account that was integrated with the iPhone and iPad.

While many banks have devoted considerable time to improving the in-store customer experience, several have been slow to act when it comes to the digital banking experience they provide. It will be interesting to see which institutions benefit from the new rule, and which institutions find themselves playing catch-up to stem the flow of customers to more digitally-savvy, customer-focused rivals.

With bank account holders able to switch within a week, new wave banks could be the real beneficiaries as consumers look for a new provider. Traditional banks will certainly have to up their digital banking game to earn and maintain customer loyalty. And with financial institutions rated on a variety of factors, the balance could tip in favour of those institutions offering customers streamlined digital banking platforms. I look forward to seeing whether customers trade in their traditional bank for a younger, more digitally-savvy model.