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

Finacial products from our partners
Property search
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

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine
    Letterman's final Late Show: Laughter, but no tears, as David takes his bow after 33 years

    Laughter, but no tears, as Letterman takes his bow after 33 years

    Veteran talkshow host steps down to plaudits from four presidents
    Ivor Novello Awards 2015: Hozier wins with anti-Catholic song 'Take Me To Church' as John Whittingdale leads praise for Black Sabbath

    Hozier's 'blasphemous' song takes Novello award

    Singer joins Ed Sheeran and Clean Bandit in celebration of the best in British and Irish music
    Tequila gold rush: The spirit has gone from a cheap shot to a multi-billion pound product

    Join the tequila gold rush

    The spirit has gone from a cheap shot to a multi-billion pound product
    12 best statement wallpapers

    12 best statement wallpapers

    Make an impact and transform a room with a conversation-starting pattern
    Paul Scholes column: Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?

    Paul Scholes column

    Does David De Gea really want to leave Manchester United to fight it out for the No 1 spot at Real Madrid?
    Season's finale brings the end of an era for top coaches and players across the continent

    The end of an era across the continent

    It's time to say farewell to Klopp, Clement, Casillas and Xavi this weekend as they move on to pastures new, reports Pete Jenson
    Bin Laden documents released: Papers reveal his obsession with attacking the US and how his failure to keep up with modern jihad led to Isis

    'Focus on killing American people'

    Released Bin Laden documents reveal obsession with attacking United States
    Life hacks: The innovations of volunteers and medical workers are helping Medécins Sans Frontières save people around the world

    Medécins Sans Frontières's life hacks

    The innovations of volunteers and medical workers around the world are helping the charity save people
    Ireland's same-sex marriage vote: As date looms, the Irish ask - how would God vote?

    Same-sex marriage

    As date looms, the Irish ask - how would God vote?
    The underworld is going freelance: Why The Godfather's Mafia model is no longer viable

    The Mafia is going freelance

    Why the underworld model depicted in The Godfather is no longer viable