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New rules due to come into force in September should make it easier to switch banks than ever before. So if you're interested in opening a new current account, read on to discover what’s set to change.
The Changes: How Do They Help?
1. From September, banks will have just seven days to complete a current account transfer – just a quarter of the time it can currently take.
2. Customers will only need to deal with a new bank to organise the switch.
When applying for a new current account, details about direct debits or other payment orders can be left with the new bank, which will take care of the arrangements.
An automatic redirection service will ensure that payments from old accounts are processed through the new account.
3. If any aspect of the transfer goes wrong, customers are guaranteed to have any bank charges refunded.
Some banks may even continue to offer goodwill gesture payments if they fail to perform the transfer correctly and on time.
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Why is Change Necessary?
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UK: Four banks control roughly 75% of the current account market.
In the UK, four high-street banks – HSBC, Barclays, the RBS Group, and Lloyds Banking Group – dominate the market for current accounts.
To consider that these groups also include NatWest, Halifax, and the Bank of Scotland, it shows how competition has reduced following the mergers between banks that have taken place since the start of the financial crisis.
Smaller “challenger” banks have made some inroads in recent months, as disgruntled customers of the scandal-struck banks have been lured by the intuitive offers and customer-friendly approach offered by smaller providers.
But the Office of Fair Trading remains concerned that major changes are still needed in the personal current account market. It is holding back on referring the issue to the Competition Commission until the new switching changes are implemented.
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Europe: Improving Competition through the EU.
The European Commission has demanded a 15-day switching service across member states by 2014 to force the banking sector to become more co-operative and more competitive.
UK has gone further and faster than this. Thanks to the Payments Council, which has invested more than £750 million in the new service, a seven-day switching service will be introduced a year ahead of this deadline.
In May 2013, it was revealed that the Council’s interventions had prompted a revision of the ISO 20022 global standard that ensures the reliable transfer of financial data.
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Research: Consumers Need Change
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Source: Payments Council, Account Switching – Quantitative Market Research Results, September 2012.
The Council’s research identified the key concerns that consumers have over switching accounts – namely that switching was too slow, too cumbersome, and too error-ridden.
The faster switching process, with the failsafe of an automated redirection and a guaranteed refund in the event of complications, is designed to assuage these concerns.
Have you been put off switching your bank account because of the hassle? Will you consider changing when the new changes come into effect? For the latest current account offers, check our current listings on Which4U.
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Keith McDonald
Which4U Editor
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