Banks in the UK will soon be forced to guide customers to opposing banks, in an attempt by the competition watchdog to strengthen competition.
It was announced on Thursday that the largest lenders; Lloyds Banking Group, Barclays, Royal Bank of Scotland and HSBC, must inform customers that they can switch to another current account provider in such situations as a branch closure or a technology malfunction .
By switching, account holders could save up to an average of £70 per year, while those relying on their overdraft could save up to £260 per year .
The Chairman of the retail banking investigation, Alasdair Smith has said there have been “longstanding concerns” about the market, and that “despite some encouraging developments, particularly in the shape of challengers that have entered the market in recent years, for too long banks have been able to sit back and take their existing customers for granted” .
Currently, the big four banks control about 77pc of personal current accounts and 85pc of business current accounts . Research has shown that consumers are more likely to switch their husband or wife than their bank account, and that 59pc of 18 to 24-year-olds bank with the same institution as their parents . A review by the Competition Market Authority found that very few customers switch accounts, with 57pc staying with the same bank for more than 10 years and 37pc for more than 20 years.
Jody Baker from Compare the Market has said that 34pc of current account holders blame the complexities in the switching process with fears that their direct debits might not be successfully transferred to their new bank. “The banking industry and the government should consider the introduction of account number portability, which we believe could lead to nearly £5bn being returned back to consumers over the next 10 years” .
Thus the service is looking to change how consumers consider their loyalty to banking services with a ‘seven-day switching service’ with the possible option of taking their sort code and account number with them in the change, making the overall experience much easier and smoother.