On the sixteenth of September this year, the UK’s Payments Council launched their new Current Account Switch Service. This system has been implemented in order to simplify and speed up the old method of transferring a current account between banks or building societies. So why has this scheme been introduced, what exactly does the Switch Guarantee cover, is it working well in its initial stages, and how do things look for the future of the new system?
The New Current Account Switch Service
Customers, small businesses, charities and trusts are able to use this service for free when they want to change their current account (or checking account) to a new financial institution. The ease with which the process is designed to work is supposed to lead to more competition between banks and other financial providers like building societies. The system should result in a wider choice for customers, and the opportunity for new financial institutions to start up in business and have a viable chance to generate a large customer base.
The Independent Commission on Banking recommended two years ago that an initiative like this should come into play in the UK because most of the business was being attracted and held by the four big banks. Changing banks was difficult, unreliable and slow, so a new process was designed to speed things up and limit the hassle.
The Switch Guarantee
The system is securely backed by both banks and building societies who are participating in the Current Account Switch Guarantee. This allows customers to choose their own switching date, and promises to take care of everything else within seven days as opposed to the usual eighteen to thirty day timeframe.
Payments both going out and coming in will be managed by the new provider, any funds in the previous account will be transferred on the switch date, and accidental payments made to the old account will automatically be transferred to the new account for thirteen months after the account has been opened. Senders of incorrect payments will be notified of the customer’s new account details.
If problems of any sort arise during the seven day transition period, the customer will be contacted before the set date of the switch. If difficulties occur and there is a loss to the account holder, any interest (lost or paid) will be refunded, as well as charges incurred on either the previous or new account relating to the problem.
For those wanting to change financial providers for their current account, the system has been strongly marketed as hassle-free, to the extent that the customer doesn’t even have to notify their bank that they are going to switch to another one. The new provider does everything on their client’s behalf. Some banks are happy to process all the information online, and a new card and PIN number are sent to the customer, making the change as painless as possible.
How Is The New Switch System Going?
After a month of the Current Account Switch System, the figures showed that 89,000 current accounts have been transferred to a new provider. Looking back at the same month last year, this shows an increase of just 11% in the number of switches. If the rate of account transfers continues like this over the coming year, the results will only be slightly higher than for 2012.
Questions may be asked about whether or not the Payment Council’s £750 million investment in planning, implementing and advertising the scheme is really worth it. However, considering the fact that the system is still in its initial stages, it isn’t possible to predict the growth of account switching for the future just yet.
The public may decide that the ease of transferring accounts and the competition between financial providers gives enough incentive to make a change, particularly if people are already unhappy with their bank’s service.
Looking Ahead To The Future
Once the Current Account Switching Service has established itself over the next few months, it will be time to see if customers have found that the process actually is easy and fast. It will be interesting to note if competition between financial providers increases enough for customers to continue taking the plunge and handing over current accounts to take advantage of another institution’s benefits.