Banks under pressure on account switching
01 December 2006 | 12776 views | 0
Customers will not gain the full benefits of competition in a Single Euro Payments Area (Sepa) unless banks make it easier to switch accounts between institutions, says a group of European regulators which are pushing for a greater say in the preparations for the new payments framework.
According to a Financial Times report, a group of European competition regulators is calling for "account number portability" following the introduction of Sepa in 2008. This would require banks to allow customers to change banks but keep their account number so it is easier to transfer services tied to accounts such as direct debits and card payments.
Italian competition regulator Alberto Heimler, who also heads competition bodies at the European Commission and the Organisation for Economic Co-operation and Development, told the FT that regulators were concerned by how infrequently customers switched accounts.
Heimler claims that costs of switching accounts allow banks to "maintain high rates of customer retention and high market power", adding that customers currently have a higher probability of getting divorce than changing bank accounts.
Although it is not one of the measures to be introduced in the Sepa framework, Heimler says competition regulators from countries including the UK, the Netherlands, Sweden and Ireland wanted to start a debate on account number portability, as well as switching costs, and that a common position could be agreed by the end of Q1 2007.
But he warns that additions to the Sepa framework at a later stage would be expensive and so banks "should be forced to develop now an account code system that would minimise the investment needed at a later stage".