British banks are trying to make it easier for customers to transfer their checking accounts (also called “current accounts”) from one financial institution to another. The “Current Account Switch Service” is part of an industry-wide overhaul aiming to streamline the account-transfer process from an average 18-to-30-days to an experience that takes — at most — seven workdays, with the new provider managing the switch on the customer’s behalf.)
Now that just over a month has passed, financial executives around the world want to know how it’s going. Although many have taken advantage of it, the jury’s still out as to whether or not the service will be the embraced by the masses. Unfortunately, the figures released so far don’t paint a very clear picture.
According to the UK Payments Council, the independent body that’s spearheading the service, approximately 89,000 people have switched their current (checking) accounts to a different financial institution since its launch on September 16.
That was enough for the organization’s chief executive, Adrian Kamellard, to deem it “an encouraging start” — although he’s also said it’s too early to say how things will pan out over the long term.
“For us, getting the system successfully launched is only the first step,” Kamellard said. “The next is to learn from what customers actually experience and if necessary to make any improvements. Everyone across the industry is determined to put in the work to get the switching experience as good as it can be for customers.” (It almost sounds like the UK Payments Council is using the same playbook as the tech teams that rolled out Obamacare websites — “defensively optimistic.)
Some financial industry observers haven’t been very impressed with the service’s start, due in large part to the fact that the statistic mentioned above is just 11% higher than what was seen during the same period in 2012, when about 80,000 accounts were transferred between UK financial institutions. Should UK consumers continue to take advantage of “seven-day switching” at that same rate for the rest of the year, the total number of “switchers” in 2013 will barely surpass the 1.2 million people who moved their checking accounts in 2012.
British banking providers spent the last two years planning for, and millions of pounds promoting (especially during the month of September), the switch — totaling £750 million. That makes it easy to see why some UK banking experts have responded to the results so far with shrugs and even scorn.
Some Financial Institutions See Healthy Gains
A number of UK financial institutions have noted an increased interest in moving accounts in the weeks following since the service’s launch, and it’s possible things will pick up in the coming weeks, months and years.
In the week following the service’s launch, for instance, First Direct reported twice as much traffic as usual from people looking to move their accounts, while another bank, Halifax, said it has seen a 90% uplift since September 16.
“Prior to launch, a new customer was making the switch to Halifax every two minutes on average,” said a Halifax spokesman in an interview. “But since then we have seen an immediate rise in the number of full switchers choosing one of our current accounts.”
Another British banking provider, Nationwide Building Society, has experienced similarly positive gains since the service’s mid-September start. According to Phil Smith, the institution’s head of current accounts, “our branches are already reporting positive feedback on the new service, and we expect the number of people moving their current account to Nationwide to continue to increase as awareness and confidence in the new service grow.”
Banking comparison site MoneySuperMarket says it has seen a 52% increase in the number of people looking to switch their accounts, and a 70% increase in the number of people going through with a switch. All of which jives with a poll the site conducted before the service launched in which 42% of respondents indicated they would move their accounts to another financial institution once it became easier to do so.
Other surveys have returned similar results, including a report commissioned by SAS that found up to 14.1 million consumers would be “very or fairly likely to change their current account provider” if the process of moving such accounts were made easier.
Whether or not that actually comes to pass won’t be known for some time, although Richard Lloyd, executive director of UK consumer campaign group Which?, suggests additional steps will have to be taken before British consumers begin switching accounts en masse.
“These early figures are a positive sign that more consumers might be voting with their feet when they’re dissatisfied with their bank,” Lloyd says, but they also suggest that “the new process alone will fail to transform switching rates and significantly increase competition in banking.”
What could help push along that transformation? One oft-discussed possibility involves the adoption of portable account numbers, which customers could take with them when they move from one financial institution to another. So far, those in charge of the British banking industry have rejected the idea as being both complicated and expensive — it’s estimated that setting up such a system could cost somewhere in the realm of £5 billion — but politicians continue to push for it anyway.
The Independent Commission on Banking, responsible for recommending the switching service, originally considered calling for full account number portability, but in the end settled for the plan that was put into place in mid-September.
According to Finextra, government officials recently ordered its new payments regulator to “conduct a comprehensive review of account portability, including a cost benefit analysis, as an immediate priority.”
For the time being, though, both the British government and the 46 million UK consumers with current accounts will have to settle for seven-day switching.