UK Payments Council reports 11% increase in account switching
The number of UK consumers who switched their current account in the four weeks since the introduction of seven-day account switching service was up 11% compared to the same period last year.
“Since its launch 89,000 switches have been successfully made by customers using the new simple, reliable and hassle-free account switching service,” said Adrian Kamellard, chief executive at the Payments Council. “We never expected that every customer who is tempted to switch would rush out to do so at launch, but this is an encouraging start.”
During the same four week period in 2012, 80,000 switches went through the old automated service. The Payments Council has said that it is too early to be certain whether the rise represents a long-term trend as it is only a “snapshot” of switching activity. Some 1.3 million people switched their current account last year, a churn rate of 2-3%. That figures has been characterised as far too low by challenger banks such as Metro Bank, which commissioned its own independent study earlier this year that found a “truly competitive” industry should have a switching rate nearer 10%.
The new seven-day account switching service is intended to help drive up competition and obliges banks to switch a customer’s standing orders and direct debits over within a maximum of seven working days, and to refund in full any costs arising from any mistakes. The measure has attracted controversy for the last several months, with opinions differing on the extent to which any increase in switching can be attributed to the new service directly and the extent to which the new service actually achieves its stated aim of driving up competition.
At one extreme, some industry observers have decried the scheme as a complete waste of time – an accusation that has been just as denied by its supporters. At the other, some firms have predicted a huge swell in the numbers switching, heralding a genuine victory for competition in the UK current account market. Most commentators seem to agree that the truth likely lies somewhere in between, with the new service helping to focus attention on the issue while not necessarily being enough to transform the UK’s estimated 46 million current accounts on its own. Responding to criticism of seven-day account switching, Kamellard suggested that it had never been intended to solve every problem, but rather that it was one step that would be complemented by other initiatives such as the Payments Council’s new mobile payments initiative, which is due to launch in the spring.
“Nobody ever said the account switching service is going to fix all ills,” said Kamellard. “Its part of the continuum. You could think forever about the perfect solution, but this is a real and material change that is here today to help UK consumers to find the right account for them.”
The Payments Council’s current account switch guarantee sets out the terms of the new switching service. The customer simply informs their chosen new bank of their desire to switch, and provides details of their old account. The customer then needs take no further action, as the rest of the process, including moving across standing orders and direct debits, is handled by the new bank. There is no need for the customer to inform the old bank of the switch.
A survey of UK consumers carried out directly before the introduction of the new switching service in September found that major high-street banks such as NatWest, HSBC and Lloyds were losing customers to rivals including Santander, Nationwide and Halifax.
The figures compared the percentage of customers switching towards and away from each of the major UK current account brands over the last 12 months. NatWest was the biggest loser: some 15% of all switchers moved away from the bank, while only 7% joined – a net loss of 8% of all switchers. Santander was the biggest winner; while 11% of switchers left the bank, 20% of them joined, giving a net rise of 9% – although the absolute numbers remain small.