Breaking down barriers to changing your bank

CUSTOMERS should be able to switch more easily – and quickly – to a new bank to open up competition in the sector, yesterday’s report claimed.

The report, by the Independent Commission on Banking (ICB), said problems with changing a bank account were one of the long-standing competition issues in UK retail banking, with the largest four UK banks holding 77 per cent of personal accounts and 85 per cent of small business accounts.

The ICB recommended that in addition to transferring an account within seven working days, the banks will also have to provide “seamless redirection” of direct debits and credits from old accounts to new ones for more than a year and at no cost to customers.

It also warned that banks should be more transparent on the prices of products by offering more detailed information on the cost of a current account on annual statements.

However, it stopped short of recommending account number portability, saying the cost and benefits are uncertain, but it added that the view on this may change in the future.

Which? chief executive Peter Vicary-Smith said: “We need a dramatically improved switching process, a regulator which acts to promote competition and a market where banks genuinely have to compete for their customers by offering good value products and better service.”

The Federation of Small Businesses (FSB) also welcomed the proposals. “Switching banks has been a problem for many small businesses and the time and cost associated with it has put them off moving,” said FSB chairman John Walker.

“These proposals will help make it easier so that small firms have the confidence to move between banks to get a better deal.”

While the ICB report said there was not yet a case for recommending the retail bank market to the Competition Commission for investigation, a failure to improve the account-switching process by 2015 would be grounds for the Office of Fair Trading to consider a referral.