Over the past few weeks there’s been little escaping the news around the launch of the UK Current Account Switch Service, which is intended to simplify, automate and speed up the process of changing a bank account in the UK, writes Adrien Sherry, a solutions consulting manager at Pegasystems. What will be the impact of this momentous change in the UK retail banking market and will it engender more competition as is hoped?
Only time will tell if the new UK Current Account Switch Service launched on 16 September 2013 will create a more competitive marketplace, but initial first week figures show 35,000 people in the UK have already used the new automated bank switching platform to change their account.
At a time when banks are under increasing pressure to attract new customers and improve services, bank account switching could live up to its government mandate to provide an impetus for positive change in the marketplace, which has traditionally been dominated by the big players of HSBC, Barclays, Lloyds Bank and RBS/NatWest.
The new service and automated platform, run by Bacs, is a great example of how the industry is having to take seriously the business of rebuilding trust and fostering more competition, under the weight of government policies to improve consumer choice. More than 17 banks, involving 33 brands and building societies, signed up to offer the service on its launch date of 16 September 2013, representing the vast majority of retail banks in the UK.
The new switching system and centralised technology platform offers great opportunities for banks to attract new customers, but it makes it equally easy for existing customers to leave. This puts the onus on financial organisations to improve not only the switching process, as they have had to do by connecting to the central platform run by Bacs, but also the level of customer satisfaction. If they don’t improve customer service then valuable business could be lost.
To improve customer service, and retain people’s accounts in an environment where it is much easier to swap them, UK retail banks have to up their game. Sitting behind this highly publicised initiative, therefore, are a number of steps to overhaul back office bank processes. Traditional approaches that relied upon manual, paper-based work procedures are no longer effective in this new environment. Manual procedures cannot effectively address the complexity and volume of work required to complete each task efficiently, which is why banks have had to change.
Each and every UK bank has had to connect to the centrally-run Bacs operated automated switching platform, which has required a lot of standardisation and technology integration work, but beyond that there has also been a lot of rewriting of internal bank procedures and business rules.
To cope with the new system UK retail banks have had to translate this complexity into clear rules that trigger automated actions to complete each task and ensure connectivity. This approach, often based upon a business process management (BPM) approach, has meant banks have had to alter their internal workflows. From the initiation of the account switching request, to automating all activities required to switch standing orders, direct debits, and overdrafts, procedures have had to change. These actions can be supported by intelligent software recommendations on a ‘next-best-action required’ basis to complete the process more efficiently.
A key requirement of the new ecosystem is the seamless transfer of customer data from one bank to another, via the central automated platform. Around that, however, UK retail banks can use BPM to gain additional customer insights and to improve the internal compliance with the system at their particular bank, easing the switching procedure.
The focus on account switching and BPM could be the catalyst for further automation at UK retail banks with the aim of improving the customer experience in other areas. For example, the upgrade of retail bank account switching systems can be extended to automating individual savings accounts (ISA) transfers and on-boarding of new business customers, as well as the switching between financial products at the end of the product lifecycle. This approach will enable UK financial organisations to improve the effectiveness of their all-around customer servicing and product suitability capabilities, enabling them to achieve differentiations across multiple points of interaction with the customer.
As a result, banks will be able to align more closely with customer relationship management (CRM) and marketing objectives targeting customers with the most suitable financial products more quickly, and at the right time. If implemented this might stop the number of customers looking to switch banks in the first place. After all, one of the most important questions when it comes to bank account switching is what makes people want to switch their bank account? Is it the speed of the account switching service or the poor experience that they had with the existing bank? Or is it simply a better deal offered by another financial service provider?
There is no right and wrong answer to these questions. With new players like Tesco Bank and Virgin Money entering the market, and the competition created from the re-emergence of the TSB and Williams and Glyn banking brands - after the forced disposal of Lloyds Banking and RBS branches under the project verde and rainbow schemes - it will be interesting to see how banks will compete for new customers under the new environment.
Hopefully the new rules for bank account switching will be an impetus for further positive change in the banking sector, enabling customers to benefit from more flexible financial products and services that are tailored to their lifestyle. After all the winners in this race for attracting more customers will be the banks that can provide the services that people will expect tomorrow. We’ve not got portable bank account numbers as some had hoped, but the UK Current Account Switch Service is still going to radically change the marketplace and banks should seize the opportunities for growth that it offers.