Should I Switch My Bank Account?
Today the UK Payments Council launched the Bank Account Switching Service. The new service is designed to make it much easier for customers to switch their bank account and features a number of benefits, including:
- A faster service — it will take seven working days to switch account versus the current process which can take between 18 and 30 working days.
- A service backed by a Current Account Switch Guarantee which details the key benefits of the switch and outlines what a customer is entitled to as a result of a failure of the switch process.
- Hassle-free for the customer; existing payment arrangements, those going out (e.g., Direct Debits and standing orders) and those coming in (e.g., salary), will be transferred automatically from the old account to the new account.
- A new central redirection service will ensure that any payments sent to, or attempted to be taken from, the old account after the switch date will be redirected automatically to the new account for a period of 13 months.
Importantly, the customer chooses the switch day, but the switching process is managed by the new bank. If a problem occurs, the new bank is responsible for resolving the issue; the customer has a single point of contact. Crucially, if a customer wants to leave a bank, they can do so simply by dealing with a new bank — there is no need to talk to the old bank as part of the process. In 2012, only 1.2 million out of 46 million account holders in the UK switched their current accounts (2.6%). Will this number go up as a result of the new service? Probably, but the question remains by how much. Just because I can do something, it doesn't mean that I should. The reality is that the core bank accounts in the UK are not that differentiated; pricing is not much of a lever either, as the accounts remain largely free for consumers. On Friday, we published a new report called The Rise of the New Bank Account? The Quest for Transactional Account Primacy
, where we discuss how the bank accounts can become more competitive. For example, we argue that the future bank accounts will need to offer sophisticated transactional capabilities and highly contextual services. The banks need to offer me more than what most do today to entice me to switch. Otherwise, even with the easy switching service, I might be better off staying put.