Over 600,000 individuals have switched from their current account provider during the initial six months of a scheme created to make changing banks simpler, quicker and easier.
Under the ëswitch guarantee schemeí, all current account holders who desire to switch to a new provider should be able to do so within 7 days of making the request, in a move that was intended to address the underlying apprehension that a number of people had toward extended waiting times when switching supplier.
Prior to the new schemes introduction, account holders had to wait up to 30 days in order for their switch to be finalised, with financial regulators arguing that this extended waiting period had deterred a number of people from switching and subsequently had made the market less competitive.
And the Payments Council identified that since the schemes implementation last October, a monumental 609,300 switches were made in the six month period up to March this year, representing a 14% rise from the equivocal statistic last year.
The increase in the number of people switching was attributed to growing awareness and utilisation of the scheme, with the Payments Council estimating that over 66% of bank account users now know that the service is available to them.
However, it can be argued that switching levels are still lower than expected when considering that there are over 45 million current account users in the country at present, though the Paymentís Councilís statistics are a positive sign that the market is moving in a superior and more competitive direction.
The Payments Council have argued that the new, more efficient policy had removed the “fear factor” and “barriers” away from switching.
ëFear factor removedí
The switching guarantee scheme also necessitates that all existing bank and building society providers must mandatorily set up the transfer of all existing incoming and outgoing payments from the users account with them to their new one.
And the Payments Council has praised the scheme for bringing power in the industry back into the customers hands, by removing the ëfear factorí from switching and making it supremely easy to simply transfer all existing payments from a current account to a new one with a more competitive rate.
“By making the Current Account Switch Service quick, hassle-free and removing the fear factor, we’ve taken away the barriers customers told us they had when it came to switching,” said Gary Hocking, managing director of the Payments Council.
“There’s also been a noticeable surge of advertising activity from current account providers, big and small, suggesting that the new service is helping foster competition and choice for customers.”
Despite the increasing momentum that the scheme appears to be gathering, some of queried whether it truly has been effective since its implementation.
Richard Lloyd, executive director of consumer group Which?, said: “Despite an increase in public awareness and confidence, switching levels are still low, suggesting that the new seven-day service is not the game-changer that can significantly increase competition in banking.”
Nevertheless, with the scheme still in its infancy it would be unfair to cast any value judgements on its effectiveness until awareness levels exceed 90% and it has been available for longer.
In particular, this summer will be an excellent measure of how effective it truly is as a number of current account providers are scheduled to unveil a series of new attractive offerings that are set to take the market by storm.
Both Virgin Money and Tesco Bank have identified that they will launch innovative current accounts in the next few months which will come along with a number of perks such as savings style paid interest on deposited balances.
And Nationwide and Santander have already released their own innovative hybrid current accounts that dual function as a savings account as well. Both pay competitive rates on balances and are thought to be the first of a series of similar accounts that will see the current account industry shaken up, and more weighted toward the needs of the customer.
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