Recent research by the Office of Fair Trading shows that the overwhelming majority feels no need to switch because they are happy with their bank. The second biggest reason is they see no point in moving (current accounts are free when in credit, so bank customers can’t move somewhere cheaper.) But almost 20 per cent of people do lack confidence about switching their account.
To those who say it should be easier to switch accounts, and that easier switching is needed to promote competition and innovation, I say: absolutely. More than that, it is happening. In September. In an agreement with the government, the industry is investing £750m in a new account switching service, which will let you chuck in your old bank and switch, easily and securely, to that shiny new bank in just seven days. The seven days is needed to do fraud checks, deliver debit cards and so on.
You go to your new bank, and they will sort it out for you. All your payments in (salary, benefits, share dividends) and out (direct debits, standing orders) will be swapped over on a day of your choice. Any other ad hoc payments that go into your old account will be forwarded to your new account for 13 months, and the person who made the payment will be sent your new details.
If something does go wrong during the switch – such as if a direct debit isn’t paid in time – you will be covered by a Current Account Switch Guarantee that will refund any charges that you incur as a result. It will actually be far easier and quicker to switch bank accounts than it will be to switch mobile phone or energy providers.
Making switching easier should promote competition between banks, which should enhance customer service and spur innovation. That, in turn, might attract more people to move (although not presumably the majority who are happy where they are).
Given this, why is there a political storm brewing around account number portability, where your account number would move with you from one provider to another? Politicians have called for it in speeches and put down amendments to legislate for it.
Many countries have considered account number portability, but none have implemented it because it is so costly and complex. It would take years to implement. The switching service will deliver almost every benefit a customer could get from account number portability, and will be ready to launch in a few months. The danger of pushing portability now is that it will undermine seven day switching before it even begins – and thus harm customers and competition rather than help them.
Anthony Browne is chief executive of the British Bankers’ Association.