UK account switching service gathers momentum
More than half a million UK consumers have switched their current accounts since September, according to new figures released by the UK Payments Council. The figures have been described as positive, but market observers remain cautious over whether or not they can be sustained and whether the UK authorities are doing enough to promote innovation.
“It is not too surprising that with the launch there was a pick-up, the question is whether levels drop next year,” said Daniel Mayo, chief analyst and practice leader for financial services technology at analyst firm Ovum.
From 1 October to 31 March, there were 609,300 switches using the UK Payments Council’s official switching service, which went live on 16 September 2013. These represent customers that completed the entire process from start to finish, including moving their salary across to the new account and completely closing their old account. Customers that merely opened a new account, or didn’t close their old one, are not included in the figures.
The UK Payments Council reported that 67% of the general public are now aware of the new service, up from 59% in December. They also found that 65% are confident in how the new service works, up from 58% in December. The number of switches during the six-month period covered represents a 14% increase compared to the same timeframe a year earlier, when there were 532,500 switches.
“By making the current account switch service quick, hassle-free and removing the fear factor we’ve taken away the barriers customers told us they had when it came to switching,” said Gary Hocking, managing director of the Payments Council. “Six months in and the latest figures suggest people clearly seem to be getting the message that things have changed for the better. There’s also been a noticeable surge of advertising activity from current account providers big and small, suggesting that the new service is helping foster competition and choice for customers.”
However, critics of the switching service have sometimes argued that there may be little point in switching if there is not sufficient differentiation between UK current accounts. The UK currently operates a ‘free banking’ model, which has been derided behind the scenes by senior bank executives on the grounds that it denies banks the revenue incentive they need to put together compelling current account propositions for consumers. Meanwhile according to Mayo, regulators face a challenge between ensuring a level playing field for all competitors in the industry and ensuring that customers get the best service possible.
“The main other focus by the FCA is on pricing transparency, and to a degree this is about making charging structures more standardised to make it easier to compare accounts,” he said. “The downside of course is that it can impede innovation. Key steps have been illustrative charging scenarios on websites and also annual statements of charges (in addition to clearer information on monthly statements) so people can actually see the cumulative amount they are paying.”
According to research published by advisory firm TNS in January, the main loser from the account switching service so far has been HSBC, which currently has around 15 million UK current account holders. From a sample of UK account holders who switched accounts, 14% left HSBC while only 2% joined the bank – the worst score of any major provider. The biggest winner was Santander, which signed up 19% of all switchers over the same period, although it also lost 8%. Halifax gained 16% and lost 12%, while Nationwide Building Society gained 10% and lost 4%.
To help customers that have decided to switch their current account, the Payments Council has published a simple checklist of actions to consider. These include thinking about the kind of account the customer needs, making sure their bank details are correct, ensuring the switch is feasible, checking whether they’ll need access to old statements, choosing a date for the switch and keeping a bank statement and debit card ready when making the switch.