UK bank switch used by over one million customers in first year

UK bank switch used by over one million customers in first year

Over one million people have used the UK's Current Account Switch Service to move banks since the scheme was introduced less than a year ago, heralding a new era for competition in the banking industry declares the Payments Council.

Figures released by the Payments Council show that there have been 1.1 million switches using the new service in the first full 11 months since launch. This is a 19% increase compared with the same time period one year before, when there were 925,985 switches.

Gerard Lemos, executive chairman of the Payments Council says: "The service was designed to make life easier for customers by removing barriers to switching, with the aim of boosting competition in the banking sector. It's clear from reviewing its very first year that it's made great ground - empowering customers with the ability to switch their bank account easily and quickly if they choose to do so."

Thirty-four new and existing institutions covering virtually 100% of the UK's current account market are offering the service to their customers. The service has reduced the time it takes to move from one bank or building society to another from an average of 18 to 30 days to just seven working days.

New figures from the independent online and telephone price comparison and switching service Uswitch appear to back up the Payments Council's confidence in the system. The firm says that consumer switching from its site has increased by 276% since the service was introduced.

David Mann, head of money, at uSwitch.com,says: "There is a seismic shift coming in people's attitudes towards their bank accounts. We are already seeing the early stages of it as we no longer see our bank as our lifetime companion. If there is a better deal elsewhere, we go for it. This is great news for competition, as it means banks are going to have to work even harder to keep existing customers and attract new ones."

The Financial Services Consumer Panel is not so convinced, pointing out that there were around 141 million current and deposit accounts in the UK at the end of 2012, of which 94% were held with only six banking groups. The market remains static, says the Panel, noting that half of all account holders have never switched, and only one in twelve has done so in the past year.

In a paper published today, it argues that "transparency and competition in the personal current account market can only be achieved by investigating cross-subsidies and understanding the true cost of banking. The Panel believes that a competitive market for current accounts requires people to switch in response to price and quality signals. However, the complexity and opacity of cross-subsidisation means that consumers do not know what price they are actually paying for their accounts."

Comments: (1)

Chris Meggs
Chris Meggs - Chasm Management Limited - Ipswich 12 September, 2014, 18:40Be the first to give this comment the thumbs up 0 likes So far so good! The technology was always there, the motivation lagged behind. Now it is proved to be a success. What does this give us? 1. It puts power to choose back in the hands of the consumer. Safely, quickly. 2. It enables a change in perception of the bank/consumer relationship. The question is, will it encourage further change demands in this space? I would predict, and like to believe, that it will encourage the consumer to demand: a). A conformity across financial institutions when it comes to basic and current account processing, probably provided by a trusted white label provider, b). A shift of FI's emphasis onto their blackend and relatively specialised product portfolio - some real differences between offerings, c). The launch of a comparative website, maybe even one that autos witches when it finds a distinct value difference for the consumer. d). Automatic provision of federally required MIS reporting, the so called "system of systems". Blue sky thinking? Pigs can fly attitude? Mmmmmmmmn we'll see.
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