FCA to look at account number "portability" as part of current account switching review

Out-Law News | 03 Oct 2014 | 3:46 pm | 2 min. read

The Financial Conduct Authority (FCA) is to investigate how easy it would be for bank customers to change provider without changing bank account number, it has announced.

The regulator will consider whether account number portability (ANP) would encourage more customers to switch current account provider, and how much a new system would cost, as part of a planned review of the UK's existing current account switching service (CASS). This work could later be taken forward by the new Payment Systems Regulator (PSR) if the FCA finds evidence that ANP would improve competition in the banking sector.

CASS, operated by the Payments Council, began in September 2013 with the aim of making it easier and faster for consumers, small businesses and charities to switch between participating providers of current accounts. The service shortened the switching period from between 18 and 30 days to a maximum of seven working days, and offers a guarantee to users that they will not face any charges or interest on their old or new accounts due to failings in the switching process if they inform their new account provider of these failings.

The UK government announced that the FCA would review the effectiveness of the new service as part of this year's Budget announcement. The review will consider how switching levels have changed in the year that the service has been operational, whether customer satisfaction has increased and how account providers' behaviour has changed in response to the switching service. The FCA said that it expected to conclude the review by March 2015.

"If effective, we would expect the new service to work well for customers by running smoothly from an operational perspective," said the FCA, setting out the terms of its review. "We would also expect it to have a material effect on the numbers of customers switching, given the relatively low switching rates for personal and business current accounts that have frequently been reported in the past."

"Increased switching, and even the potential threat of switching, should encourage firms to offer better products and service quality, leading to better consumer outcomes," the FCA said.

According to the FCA, ANP could potentially remove the need to change direct debits and standing order instructions; something frequently cited by or perceived by consumers as being one of the biggest barriers to switching. The regulator intends to survey retail and small business customers in order to better understand what puts customers off switching and the extent to which these factors have continued since the new service began.

The study will consider whether the potential benefits of ANP would be likely to actually deliver additional improvements to the switching process, whether introduced alone or alongside other technical solutions such as shared payment services. It will also attempt to establish just what benefits any additional technical solutions would need to deliver to consumers in order to increase switching rates and competition.

The new PSR is due to become fully operational in April 2015 and will replace industry self-regulation through the Payments Council. It intends to publish a consultation on its proposed regulatory framework for payment systems later this year, as well as to set out future work proposals. The objective of the PSR's work is to encourage innovation and competition in payment systems for the benefit of end-users.

According to the Payments Council, 1.1 million customers switched current account provider through CASS in the first 11 months of its operation - a 19% increase on the same time period the year before. Of those who used the service, 88% of consumers said that it involved very little effort on their part while 87% of businesses said that they found it easy to move accounts.