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Banking sector 'must conform to account-switching rules'

25/09/13

The government's much-vaunted new scheme to make it easier for consumers to switch their bank accounts to another provider was rolled out earlier this month, with hopes that it will boost competition between banks as well as offering freedom of choice to customers who might previously have avoided getting involved in the time-consuming and potentially expensive process.

However, concerns remain that the banking sector - which recently came under fire for yet another mis-selling scandal- does not have the technological nous to get on board with The Current Account Switch Service (Cass).

If they do not cope well with the new regulations they could be forced to conform with even stricter government demands, such as an industry-wide information sharing programme.

The idea of the new Cass scheme is that all payments coming and going out of an account should be automatically transferred to the new banking provider within seven days, thus meaning consumers should not incur any charges. Furthermore, any charges that do come up will now be met by the bank itself.

Lawmakers and regulators feel a lack of real choice has been a major factor behind issues such as the loan insurance scandal and complex interest rate hedging products; they hope this shift will change the complexion of the industry.

Nick Payne, retail banking consultant at SAS, told Reuters his firm's research suggests switching between providers will increase from its historic levels of two to three per cent as customers take advantage of the newly-refined processes.

"Now savvy consumers can scour the market for the package that best suits them. Banks will now have to work hard to differentiate their offerings, through enhanced customer service and targeted marketing," he predicted.

Certainly, financial services organisations aimed at consumers will no longer be able to sit on their laurels and assume that their customers will stay in one place.

There has been some criticism of the measures from within the industry, but the majority of decision-makers appear to have accepted that making it work is in the best interests of all parties involved.

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