Bank customers to be able to transfer money between accounts within hours under sweeping plans to reform the industry

Osborne said choice is a powerful tool to improve markets and customer service

Bank customers will be able to transfer money between accounts within hours not days, George Osborne announced today, as he promised a banking “revolution in customer choice”.

Credit and debit card companies will also be forced to pass on money to businesses in a fraction of the time it takes at present as part of a package of measures to improve confidence in the banks.

It will also be made much easier for bank customers to swap their accounts to another provider while new entrants will be encouraged to come into the market.

In a speech in Dorset Mr Osborne said choice was the most powerful tool we have to improve markets and customer service, reward good companies and penalise poor ones.

“One of the prices we’re paying for the financial crisis is that our banking sector is now dominated by a few big banks,” he said.

“It verges on an oligopoly. I want new faces on the high street. I want upstart challengers offering new and better services that shake up the established players.

“From September this year, every customer of every bank in Britain will be able to switch their bank account from their existing bank to another one in seven days. All they will have to do is sign up to a new bank – and the rest will follow.

All the direct debits, the standing orders, everything will be switched for you with no hassle. This is a revolution in customer choice.”

Mr Osborne also promised a revolution in the payments systems which is crucial to the banking system.

“Why, in the age of instant communication, do small businesses have to wait for several days before they get their money from a credit or debit card payment?” he asked. “Why do cheques take six days to clear?

“Customers and businesses should be able to move their money round the system much more quickly.  Why is it that big banks can move their money around instantly, but when a small business wants to make a payment it takes days?

“The system isn’t working for customers, so we will change it.”

At the same time Mr Osborne announced he would introduce new legislation which, for the first time, will force banks to split up their investment arms from their retail operations.

The move is designed to prevent banks "gambling" with deposit money and allow banks' investment arms to go bankrupt without threatening savers. Any bank which fails to comply with the new rules could be forced by the Bank of England to sell off its investment or retail operations – the so -called "electric ring fence".

The decision to "electrify" the ring fence between customer banks accounts and investment banking is a surprise as Mr Osborne and other senior ministers had previously appeared hostile to the move.

However the Chancellor is thought to have concluded that the proposal, put forward by the Chairman of the Banking Commission, Andrew Tyrie, was necessary to reassure the public the new rules have "teeth" and couldn't be manipulated by the banks in the future.

Mr Osborne also took swipe at the Labour leader, Ed Miliband, suggesting that his anti-bank rhetoric is damaging a vital British national interest. "Any bunch of politicians can bash the banks, chase the headlines, court the populist streak," he said.

"But what good would that do our country? The jobs, the investment, the banking system we all need would go with it. Let's take the anger we feel about the banks and turn it into change to build the banking system that works for us all."

Labour's Shadow Treasury Minister, Chris Leslie, said the Chancellor was being dragged towards a partial climbdown.

"We must see fundamental cultural change in our banks," he said. "If this does not happen then banks will need to be split up completely, as we made clear in the autumn."

News
Destructive discourse: Jewish boys look at anti-Semitic graffiti sprayed on to the walls of the synagogue in March 2006, near Tel Aviv
news

As anti-Semitic attacks rise, Grant Feller re-evaluates his identity

Life and Style
food and drink

Savoury patisserie is a thing now

News
news

Meet the primary school where every day is National Poetry Day

News
people Biographer says cinema’s enduring sex symbol led a secret troubled life
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
News
newsGlobal index has ranked the quality of life for OAPs - but the UK didn't even make it into the top 10
News
people

Kirstie Allsopp has waded into the female fertility debate again

News
In 2006, Pluto was reclassified as a 'dwarf planet'
scienceBut will it be reinstated?
News
The moon observed in visible light, topography and the GRAIL gravity gradients
science

...and it wasn't caused by an asteroid crash, as first thought

News
people
News
Researchers say a diet of fatty foods could impede smell abilities
scienceMeasuring the sense may predict a person's lifespan
Sport
footballArsenal 4 Galatasaray 1: Wenger celebrates 18th anniversary in style
News
peopleStella McCartney apologises over controversial Instagram picture
News
Gillian Anderson was paid less than her male co-star David Duchovny for three years while she was in the The X-Files until she protested and was given the same salary
people

Gillian Anderson lays into gender disparity in Hollywood

Life and Style
Laid bare: the Good2Go app ensures people have a chance to make their intentions clear about having sex
techCould Good2Go end disputes about sexual consent - without being a passion-killer?
Arts and Entertainment
Richard Burr remains the baker to beat on the Great British Bake Off
tvRichard remains the baker to beat as Chetna begins to flake
Life and Style
fashionThe Secret Angels all take home huge sums - but who earns the most?
Sport
football

Striker ignored Brendan Rodger's request to applaud audience

News
i100
Arts and Entertainment
Amazon has added a cautionary warning to Tom and Jerry cartoons on its streaming service
tv
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.

iJobs Job Widget
iJobs General

Nursery Nurse

Negotiable: Randstad Education Manchester: Level 3 Nursery NurseI am currently...

Nursery Assistant

Negotiable: Randstad Education Manchester: Breakfast and after school club wor...

KS1 and KS2 Primary NQT Job in Lancaster Area

£85 - £140 per day: Randstad Education Preston: Randstad Education is urgently...

DT Teacher - Resistant Materials

£33000 - £34000 per annum: Randstad Education Group: Technology Teacher (Resis...

Day In a Page

Italian couples fake UK divorce scam on an ‘industrial scale’

Welcome to Maidenhead, the divorce capital of... Italy

A look at the the legal tourists who exploited our liberal dissolution rules
Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

Tom and Jerry cartoons now carry a 'racial prejudice' warning on Amazon

The vintage series has often been criticised for racial stereotyping
An app for the amorous: Could Good2Go end disputes about sexual consent - without being a passion-killer?

An app for the amorous

Could Good2Go end disputes about sexual consent - without being a passion-killer?
Llansanffraid is now Llansantffraid. Welsh town changes its name, but can you spot the difference?

Llansanffraid is now Llansantffraid

Welsh town changes its name, but can you spot the difference?
Charlotte Riley: At the peak of her powers

Charlotte Riley: At the peak of her powers

After a few early missteps with Chekhov, her acting career has taken her to Hollywood. Next up is a role in the BBC’s gangster drama ‘Peaky Blinders’
She's having a laugh: Britain's female comedians have never had it so good

She's having a laugh

Britain's female comedians have never had it so good, says stand-up Natalie Haynes
Sistine Chapel to ‘sing’ with new LED lights designed to bring Michelangelo’s masterpiece out of the shadows

Let there be light

Sistine Chapel to ‘sing’ with new LEDs designed to bring Michelangelo’s masterpiece out of the shadows
Great British Bake Off, semi-final, review: Richard remains the baker to beat

Tensions rise in Bake Off's pastry week

Richard remains the baker to beat as Chetna begins to flake
Paris Fashion Week, spring/summer 2015: Time travel fashion at Louis Vuitton in Paris

A look to the future

It's time travel fashion at Louis Vuitton in Paris
The 10 best bedspreads

The 10 best bedspreads

Before you up the tog count on your duvet, add an extra layer and a room-changing piece to your bed this autumn
Arsenal vs Galatasaray: Five things we learnt from the Emirates

Arsenal vs Galatasaray

Five things we learnt from the Gunners' Champions League victory at the Emirates
Stuart Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

Lancaster’s long-term deal makes sense – a rarity for a decision taken by the RFU

This deal gives England a head-start to prepare for 2019 World Cup, says Chris Hewett
Ebola outbreak: The children orphaned by the virus – then rejected by surviving relatives over fear of infection

The children orphaned by Ebola...

... then rejected by surviving relatives over fear of infection
Pride: Are censors pandering to homophobia?

Are censors pandering to homophobia?

US film censors have ruled 'Pride' unfit for under-16s, though it contains no sex or violence
The magic of roundabouts

Lords of the rings

Just who are the Roundabout Appreciation Society?