The 16 September is the anointed date for the start of the new UK Current Account Switch Service, explains Adrian Kamellard, chief executive of the coordinating UK Payments Council, in this blog explaining the concept and technology behind the government-mandated shared technology platform.
The new service is designed to make it simpler for customers to change their UK retail bank by ensuring that all direct debits, standing orders, account information, balances, and so forth automatically follow the customer if they decide to switch banks, thereby encouraging more competition into the sector. The idea is to make it as easy and hassle-free to switch banks as it currently is to redirect your post for a year, but there has obviously been a lot of back-end work required by the 33 UK banks and building societies signed up to use the new service, which will be operated by the Bacs automated clearing house (ACH).
Over the past two years the UK Payments Council has been working closely with payment service providers (PSPs), banks and building societies to develop a world-leading bank account switching system in Britain. When it is launched on 16 September 2013 it will provide a standardised, common platform across the UK retail bank sector and will be free to use for consumers, small charities and small-to-medium-sized enterprises (SMEs). The service will also be supported by a Current Account switch guarantee - ensuring that UK retail bank customers will be refunded any interest and charges made on either their old or new bank accounts, as a result of any failure in the service.
New UK Current Account Switch Service Imminent: Supporting Tech
The new bank account switching service in the UK will deliver considerable benefits compared to the previous bank-by-bank system. Importantly it will be charge-free and faster, with the new switching times taking just seven working days to be processed. This is a substantial improvement on the current process that can take anything from 18 up to 30 days. The new UK switch service will also be managed in full by the customer’s chosen new bank or building society and thanks to the technology automation and new processes in place will not require any effort on their part. This means that anyone who decides to switch will not need to talk to their old bank as part of the switchover process - the new service simply allows customers to choose a switch date that suits them and then the shared technology platform takes over.
By making it easier and quicker to change current account providers, the new UK service aims to promote competition between established providers and smaller, challenger banks and building societies. The technology behind the system also aids this. The Current Account Switch Service will operate on a custom-developed IT platform based on the key international message standard for exchanging financial information: the ISO 20022 specification. This allows the entire process to be automated for high street banks. However, for smaller banks the service also supports an integrated web-based alternative [see here for more on the technology -Ed].
The integration and simplification of connectivity provided by moving towards a shared platform is a crucial element in encouraging both large, established participants and new, challenger banks to offer the Current Account Switch Service to customers.
The Customer Journey and Switchover Process
Turning to the customer journey, from their chosen switch date all existing payments including those coming in and those going out of a customer’s old account, will be transferred automatically to the new account. Likewise, any single future-dated payments due to be made from the old account after the switch date will also be set up and paid from the new account automatically. The old account will then close as part of the switchover process and a new central redirection service will ensure that any new payments accidently sent to the old account after the switch date will automatically be redirected to the new account for a period of 13 months.
From launch day on the 16 September this year, 33 bank and building society brands in the UK - covering almost all of the UK current account market - will be offering the new Current Account Switch Service, supported by the Guarantee and accompanying Trustmark.
No Account Number Portability (ANP)
The new UK Current Account Switch Service mandated by the government has been developed with the aim of improving competition in the retail banking sector and delivering greater customer choice. Some have claimed this service will not go far enough and there have been calls for more radical changes and the introduction of Account Number Portability (ANP) - the ability to retain the same account number when switching accounts. Effectively this would operate in the same manner as changing your mobile phone presently does with the number following you the customer.
However, at present there is no conclusive evidence that ANP would deliver more choice or competition in the UK retail banking sector and its creation would come with high costs and extra technology implementation requirements that would be onerous for UK banks as they seek to boost their capital ratios in compliance with the new post-crash Basel III regime and to lend more money to SMEs to support economic recovery.
The principal problem with ANL however is that every customer would have to be given new banking details - even those not contemplating switching. Delivering such a wholesale change could take years to introduce with no guarantee of greater benefit to customers than the new service launching on 16 September 2013.
The debate surrounding ANP is far reaching and goes beyond making it easier for customers to switch their current accounts. We are currently assessing how and when the critical payments infrastructure should be developed in future as part of a longer term Payments Roadmap. We need to fully assess the risks and benefits of achieving these outcomes and understand what customers and the economy need before deciding on the next direction for payments. Careful monitoring and on-going assessments of the operation of the new UK Current Account Switch Service will be made after its launch to ensure it is being fully optimised.
After two years in the making and close collaboration across the banking industry we at the UK Payments Council are confident that the new Current Account Switch Service will deliver the step change needed to drive retail bank competition in the UK market and deliver greater choice for consumers.