A Finextra member 20 June, 2014, 14:18 0 likes

Current Account Switching is an intiative designed to stimulate competition as eveidenced by more switching. The impetus has come from Government. Way back in November 1998 the Government commissioned an independent review of the Banking Industry.  In July 1999, an interim report was published: Competition and Regulation in Financial Services: Striking the Right Balance" which had within its scope questions of innovation, competition and efficiency compared with other countries around the world. 

In March 2000, a turning point came with the publication of 'The Cruickshank Report.   The report highlighted barriers to entry to payments schemes then owned directly by banks, and the fact that banks were represented on the board of the FSA. This theme of banks 'marking their own homework' is still relevant today and we can now wait in great anticipation to see how the new Payment Systems Regulator approaches it.

One outcome of the Cruickshank report was an initiative to create a service that formalilsed and digitised the transfer of Direct Debits and Standing Orders and reduce it to a ten day one. Shortly after the service went live I tried it myself and found that flaws in the guidance about implementation meant that although the messages could be exchanged between banks and new payments set up at the new bank, the end to end process could take a great deal longer depending on the combination of banks involved.  

Although one can transfer supplier or cancel a direct debit, many banks failed to purge old records and presented customers with a list of 30 or 40 debits and credits, only 3 or 4 of which were live.   Had this real-life issue and the full customer experience been part of the design of the service, which instead was technology driven, things may have been different.

The new Current Account Switching Service is a phenomenal initiative that cuts that time in half. Between banks the end to end process is 5 days but as we know, some banks pad this out making the process seven days to the customer.  Another example of this 'padding' is in faster payments, where the bank to bank processs is under two seconds in duration but the time lag between the payment being made and showing up in an account is often stretched due to fraud checks or the complications of the enormous legacy systems within bank infrastructure then talking to interfaces such as internet banking systems.

In both cases however, the initiative was driven from the top down - out of the aim to improve competition.  Certainly this time around there are more banks to choose from and banks have invested in advertising to stimulate demand.  

Apathy in retail banking is a longstanding problem (unless you are a bank in which case the lifetime value of a customer is to be sought  and protected avidly). However, with more choice and comparison tools to hand, things should improve. According to the Payments Council switching rates since CASS launched have been positive. So keep switching and try a new flavour of banking. They are not all vanilla.