- Current Account Switch Service could increase number of switchers by over a million people annually, from 1.3 million people a year (2012) to 2.5 million a year (2023)
- Additional reforms including account portability could more than triple (3.5x) switching rates annually in next 10 years
New econometric research out today from Metro Bank reveals that the Government backed Current Account Switch Service (CASS) could substantially improve switching rates.
The report, commissioned by Metro Bank, the newest high street bank in more than 100 years, in partnership with the Centre for Economic and Business Research (Cebr), analyses account switching rates in the UK and looks at measures to ensure a more competitive and efficient current account market. It reveals that the introduction of CASS could increase the number of current account switchers by over a million people annually, from 1.3 million people a year in 2012 to 2.5 million a year by 2023 (a switching rate of 5.0%).
The report’s econometric analysis estimates that an efficient or “open” market could see 10% of the market switching per year. It discusses that while the current account arena is currently becoming more competitive (rising from 1.7% of the market switching in 2003 to 2.8% in 2012), the current account switching rate remains at less than one third of the level of the gas sector and at approximately one quarter of the level in the electricity sector.
Craig Donaldson, Chief Executive, Metro Bank said: “An efficient current account switching market is essential for a competitive banking sector. Increased competition forces banks to work harder to innovate, differentiate themselves and keep their customers happy. At the moment, far too many consumers put up with poor service from their bank simply because they believe switching to be too complicated. We expect that CASS will help to breakdown this perception and encourage consumers to find a bank that best suits their needs. As the research demonstrates, with switching numbers predicted to almost double in the next decade, CASS is certainly a great first step to achieving an open current account market.”
In addition to CASS, the report concludes that the introduction of additional reforms to the switching market could increase the current account switching rate by 3.5x a year; representing 4.6 million switches annually or 9.3% of the market by 2023. These initiatives include:
- Account number portability: Enabling customers to switch their current account numbers and sort codes between different banks and building societies. This, in addition to CASS, would increase the switching rate by 2.1% and would lead to 6.4% of the market switching annually by 2023; this equates to 3.2 million people switching annually.
- Transparency: Current accounts tend to be seen as "free" products because in most cases no explicit fee is charged. In reality there are costs associated but they are largely hidden or visible but opaque. Increased transparency could help consumers to really understand their accounts, in addition to:
- Standardised comparison tables: This would allow consumers to accurately compare current accounts, and make well informed choices. The report anticipates that in conjunction with the above reforms, this full reform scenario would take switching levels to 4.5 million or 9.3% of the market switching annually.
Donaldson continues: “An open current account market will give consumers power, allowing them to easily switch from banks that don’t meet their needs. Therefore an open switching market, like the one described, will allow consumers to actively seek out what they want and need from a banking partner, forcing banks to put their customers first. Consumers will switch because they have a positive reason to move like improved customer service, and because they believe in the bank they are choosing. This makes switching a positive experience and will ensure that banks are designing their services with customers in mind.”