Report backs account switch reform
Monday 11 April 2011
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; request a free guide on NISAs from Hargreaves Lansdown
Questions of Cash: What are my rights if my leak is caused by neighbours’ roofs?
Pension mortgages: 'The advice I was given was wrong and now I face losing my home'
Gold-plated pensions – the key to retirement freedom?
Bargain Hunter: Win a Bentley competition to be driving in a winter wonderland
Bank-beating exchange rates on your international payments
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 Doctors remove 80 teeth from boy's jaw
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 4 Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
Millions of Britons struggling to feed themselves and facing malnourishment
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
Douglas Carswell tells Ukip to stop blaming foreigners as youth poll shows Nigel Farage is even less popular than Nick Clegg
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...
Day In a Page
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens