Tuesday, 25 January 2011

Banks not ambitious enough with switching targets

It's being reported that the banks are finally looking to invest in improving the time it takes to switch your current account from one  bank to another. This has been talked about for at least two years when the 2008 OFT report on banking said that they had to do better, but the catalyst appears to be in the Independent Commission on Banking. The banks want to appear to be doing something about speeding up switching before they are compelled to.

They are saying that they are aiming to get switching down to one to two weeks from the current average of four to six weeks, possibly even to the Dutch standard of seven days. They are also saying that it will cost them hundreds of millions of pounds to make the systems changes to achieve this. But why? They're not talking about account portability, where a customer has an account number for life (see http://www.itsafinancialworld.net/2011/01/why-portable-bank-accounts-arent-going.html ), but rather simply moving the money out of one bank account and trasferring it to another account in a different bank and moving direct debits and standing orders to the other bank. Even today internet bankers can see the balance on their accounts, they can see a list of their standing orders and their direct debits. Even if you were to do the process manually writing down the list of standing orders and direct debits, emailing it to the receiving bank, making the transfer of funds as a consumer would do it, surely can't take four to six weeks and cost hundered of millions of pounds to automate that manual process?

The challenge to the banks should not be to deliver switching in one to two weeks, not to deliver it in seven days but they should be aiming to deliver it no longer than it takes for the money to clear, and with Faster Payments which means it should be twenty four hours, but to be generous to the banks, let's say 2 working days from receipt of instruction.

Ultimately the question is even if there was a gold-plated process that was guaranteed to take less than two working days, would we see customers switching accounts in their droves? The reality is probably not. The reason customers don't switch current accounts is not because of the process, but rather because there is so little differentiation between banks in terms of the products they offer, the prices they charge and the service they deliver that banking is a commodity and most customers don't care which bank they bank with because they see them all as the same. That is the real challenge for the banks and where they should be investing their money.

At the end of the day the only real reason the banks are now proposing to  invest in the switching process is to remove one more complaint about them from the Independent Commission on Banking's long list.

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