UK Current Account Switch Service: The Final Countdown

by Tristan Hugo-Webb 0

Since the beginning of this year,PaymentsJournal has highlighted the push from United Kingdomauthorities to make the payments market, in particular the bankingsegment, more competitive.

In February, UK Chancellor of the Exchequer George Osbornerevealed plans to increase competition in the domestic paymentindustry by reducing the power of the big four banks. Barclays,HSBC, Lloyds, and the Royal Bank of Scotland currently handle 75percent of all checking accounts. Then in June, UK financialinstitutions promised to heed government plans and make switching accountseasier. A week later, the UK Payments Council published its ‘paymentsroadmap’ which included among other topics the checking accountswitch.

Looking ahead, the new Current Account Switch Service will go liveSept. 16 and that will enable consumers to more efficiently movebetween the 33 financial institutions in the United Kingdom.

So why is this service being launched? While the UK authorities maystate improving competition is their primary objective, consumerdiscontent with the status quo also is driving the move. Consumersaren’t happy in general following the global financial crisis,ongoing economic malaise, and recent banking industry scandalsacross Europe. Many consumers have turned to smaller, alternativebanking services for their banking needs.

The new service should help as switching financial institutions isa relatively difficult and time consuming process in the UK.Currently, moving your checking account between financialinstitutions can take between 18 and 30 days. Consumers can choosetheir new start date under the new service. Furthermore, the movewill require almost no effort from the customer as direct debitsand standing orders both outgoing and inbound will automatically bemoved from the old account to the new account. That means consumersdon’t have to worry about missing any recurring bill payments.Lastly, a central redirection service will ensure payments will bededucted from the new account.

While the new service will not shift unpopular consumer attitudestowards the banking industry overnight, it is a step in the rightdirection and perhaps most importantly, will see increasedcompetition between major traditional financial institutions andnew players. The service also serve as a precedent for othercountries to follow, especially if the service is a success, and inmarkets where either competition is limited or the domestic bankingindustry is not yet fully developed.

For more information on the UK Current Account Switch Service, seethe UK Payments Council’s website as it goes into depthabout the benefits of switching and other issues around theservice.