Current account switches up just 11% since launch of seven-day switch

The number of people switching current accounts has only increased slightly since the seven-day switch.

The number of people switching their current account in the four weeks since the launch of the seven-day switch has increased just 11% based on the same period last year.

This is equivalent to a yearly increase of 9,000 to 89,000 people since the new service was launched on 24th September.

The Payments Council, which is behind the scheme, says this is only a “snapshot” of activity because it’s too early to evaluate if the rise represents a long-term trend.

Current account switching

The seven-day switch was introduced to try to encourage people to change current accounts more frequently.

It guarantees a current account will be switched to a new provider within seven working days and is supposed to take a lot of the hassle out of switching. The new provider, for example, has the responsibility for making the switch and ensuring any standing orders or direct debits are moved over.

If any of these aren’t correctly transferred, it then has the job of paying out any lost interest or late payment fines.

But the process hasn’t gone as smoothly as first planned and many people, such as our own Simon Ward, have had problems completing the switch within a week.

Adrian Kamellard, chief executive for the Payments Council, said customers can make sure this doesn’t happen by giving the new provider up-to-date details. The banks also need to help by maintaining good levels of customer communication.

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Lack of information

The introduction of the seven-day switch has been welcomed by both the banks, customers and consumer groups. But some, such as Jayne-Anne Gadhia, chief executive of Virgin Money, believe it could go further.

Speaking at the British Bankers' Association (BBA) conference last week she said a portable current account number would make switching easier. As she pointed out, there has been a 30% reject rate so far with the new scheme and “it’s not as easy as it sounds”.

A portable current account number would wipe out the problems and administration of setting up new accounts every time people switch banks.

But, others in the banking industry, such as Ashok Vaswani, chief executive of retail and business banking at Barclays, disagreed.

No competition

One of the main problems within the banking industry is the dominance of a few large banks offering almost identical products. Smaller players, such as Virgin Money or Metro Bank, are hardly getting a look in because the market share available to them is so minute.

Executive director for Which?, Richard Lloyd, said he thinks the problem is that customers don’t have the means to make an effective switch.  

“There needs to be something different to make someone switch, this needs to go above the teaser offers and be something new and distinctive,” he said.

I agree with Lloyd. Looking at the main accounts on offer there’s nothing particularly exciting or different about any of them. While some competitive benefits do exist, such as in-credit interest from Santander, Nationwide and Clydesdale and Yorkshire Banks, there isn't a big enough difference between the major names.

Handing out a free £100, as First Direct and Halifax do, is tempting. But it's not enough.

The problem isn’t the fact it takes so long to switch, the problem is there isn’t enough difference between the banks to encourage people to up and leave one for another. This is why switching numbers are so mediocre.

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