Report backs account switch reform

Competition between banks has been "blunted" by a lack of choice for consumers and the problems people face in switching accounts, the Independent Commission on Banking (ICB) said today.





The group called for a number of measures to be introduced to make it easier for people to move their current account, including a set time period, possibly of seven working days, during which banks would have to complete the process.



A new redirection system could be created during the next couple of years which would automatically transfer direct debits and credits from old accounts to new ones.



The commission also suggested that consumers should be able to take their bank account number with them when they change provider, to avoid the need to transfer all of their direct debits and standing orders, which is one of the main areas in which problems arise.



It said this measure had been rejected in the past as being too costly but it should be reconsidered if no other solutions appeared to be effective.



The commission said competition between banks had been blunted by the actual and perceived difficulties people faced in switching their current account to another provider.



It cited research by Consumer Focus, which found that 31% of people had changed their energy supplier during the past two years, 26% had switched telephone provider and 22% had changed insurer, but only 7% of people had moved their current account.



The lack of switching has contributed to the UK's five largest banks holding an 87% share of current accounts in 2010.



There have been just six new entrants into the current account market during the past decade, of which only four remained for more than a year, with these failing to take a significant share of the market.



The commission said conditions were generally poor for consumer choice while people faced difficulties in understanding and comparing products, and there were barriers preventing new players, who may have better customer offerings, entering the market,



It said: "There is reason to believe that a radically-improved system for switching accounts could and should be introduced at a reasonable cost within a short timescale.



"This would help to reduce obstacles to switching, which constitute one of the main barriers to entry as well as blunting competition between established banks.



"This could be less costly and simpler to introduce than full account number portability while delivering many of the benefits."



Consumer groups welcomed the report.



Peter Vicary-Smith, chief executive of Which?, said: "Competition on the high street is at an all-time low, with the three biggest retail banking groups consisting of two that would have collapsed without taxpayer support and one that has a woeful record on customer services.



"The financial crisis has increased the market power of the largest banks, leading to a worse deal for consumers. We're pleased the commission recognised this, but need to consider whether the recommendations will go far enough to address the parlous state of competition in the UK."



Mike O'Connor, chief executive of Consumer Focus, said: "We welcome moves to encourage switching of accounts, which our research shows is unnecessarily problematic."

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

News
peoplePair enliven the Emirates bore-draw
Arts and Entertainment
tvPoldark episode 8, review
News
Britain's opposition Labour Party leader Ed Miliband (R) and Boris Johnson, mayor of London, talk on the Andrew Marr show in London April 26
General electionAndrew Marr forced to intervene as Boris and Miliband clash on TV
Arts and Entertainment
Ramsay Bolton in Game of Thrones
tvSeries 5, Episode 3 review
Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Ashdown Group: Treasury Assistant - Accounts Assistant - London, Old Street

    £24000 - £26000 per annum + benefits : Ashdown Group: A highly successful, glo...

    Ashdown Group: Business Analyst - Financial Services - City, London

    £50000 - £55000 per annum: Ashdown Group: Business Analyst - Financial Service...

    SThree: Trainee Recruitment Consultant

    £18000 - £23000 per annum + OTE £45K: SThree: At SThree, we like to be differe...

    SThree: Trainee Recruitment Consultant

    £20000 - £25000 per annum + competitive: SThree: Did you know? SThree is the o...

    Day In a Page

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    Not even the 'putrid throat' could stop the Ross Poldark swoon-fest'

    How a costume drama became a Sunday night staple
    Miliband promises no stamp duty for first-time buyers as he pushes Tories on housing

    Miliband promises no stamp duty for first-time buyers

    Labour leader pushes Tories on housing
    Aviation history is littered with grand failures - from the the Bristol Brabazon to Concorde - but what went wrong with the SuperJumbo?

    Aviation history is littered with grand failures

    But what went wrong with the SuperJumbo?
    Fear of Putin, Islamists and immigration is giving rise to a new generation of Soviet-style 'iron curtains' right across Europe

    Fortress Europe?

    Fear of Putin, Islamists and immigration is giving rise to a new generation of 'iron curtains'
    Never mind what you're wearing, it's what you're reclining on

    Never mind what you're wearing

    It's what you're reclining on that matters
    General Election 2015: Chuka Umunna on the benefits of immigration, humility – and his leader Ed Miliband

    Chuka Umunna: A virus of racism runs through Ukip

    The shadow business secretary on the benefits of immigration, humility – and his leader Ed Miliband
    Yemen crisis: This exotic war will soon become Europe's problem

    Yemen's exotic war will soon affect Europe

    Terrorism and boatloads of desperate migrants will be the outcome of the Saudi air campaign, says Patrick Cockburn
    Marginal Streets project aims to document voters in the run-up to the General Election

    Marginal Streets project documents voters

    Independent photographers Joseph Fox and Orlando Gili are uploading two portraits of constituents to their website for each day of the campaign
    Game of Thrones: Visit the real-life kingdom of Westeros to see where violent history ends and telly tourism begins

    The real-life kingdom of Westeros

    Is there something a little uncomfortable about Game of Thrones shooting in Northern Ireland?
    How to survive a social-media mauling, by the tough women of Twitter

    How to survive a Twitter mauling

    Mary Beard, Caroline Criado-Perez, Louise Mensch, Bunny La Roche and Courtney Barrasford reveal how to trounce the trolls
    Gallipoli centenary: At dawn, the young remember the young who perished in one of the First World War's bloodiest battles

    At dawn, the young remember the young

    A century ago, soldiers of the Empire – many no more than boys – spilt on to Gallipoli’s beaches. On this 100th Anzac Day, there are personal, poetic tributes to their sacrifice
    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves

    Follow the money as never before

    Dissent is slowly building against the billions spent on presidential campaigns – even among politicians themselves, reports Rupert Cornwell
    Samuel West interview: The actor and director on austerity, unionisation, and not mentioning his famous parents

    Samuel West interview

    The actor and director on austerity, unionisation, and not mentioning his famous parents
    General Election 2015: Imagine if the leading political parties were fashion labels

    Imagine if the leading political parties were fashion labels

    Fashion editor, Alexander Fury, on what the leaders' appearances tell us about them
    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    Phumzile Mlambo-Ngcuka: Home can be the unsafest place for women

    The architect of the HeForShe movement and head of UN Women on the world's failure to combat domestic violence