Switching bank accounts made easier

People wait to be served at a National Bank branch in Kisumu on September 2, 2013. Sadly, we do not have independent and credible customer satisfaction data. FILE 

By CAROL MUSYOKA

In Summary

• The regulator should take the lead in researching on, and publishing, customer satisfaction data.

If bankers can count, how come they have eight windows and only two tellers?” Anonymous.

The Independent Commission on Banking was established in the United Kingdom in June 2010 following the global financial crisis of 2007. Its mandate was to consider structural and non-structural reforms in the UK banking sector to promote financial stability and competition.

The commission, chaired by Sir John Vickers, produced a series of recommendations in September 2011 which have formed the basis of some legislation introduced by the government thereafter.

One of the key recommendations was aimed at improving the competitive landscape of British banking by making it easier for customers to switch banks.

The commission found that people changed banks on average once every 26 years. What makes it difficult for you to move your account facilities at your current banking provider?

You probably have on average about five standing orders or direct debits on your account including paying school fees installments, car loans, rent and life insurance policies among many other regular payments in the daily grind of life.

The very idea of filling out forms to move all these payments to another banking provider is mind numbing at best and horrifying at worst.

The nightmare that the forms will not be acted upon on time, payments missed, the Credit Reference Bureau notified and all the nasty correspondence that will follow essentially keeps many of us “trapped” by our current banking providers.

Back in the UK, Sir John Vickers’ commission realised that by making switching bank accounts easier, the competitive landscape of banks would change as the lenders would have to improve their customer service due to the ease of customer attrition.

Essentially bank accounts would have the same kind of portability that the mobile phone industry enjoys in number portability. According to an August 2013 online BBC article titled Bank Account Switching Service to Launch in September, only about two million people or 2.5 per cent of the UK’s total banked switched accounts.

The UK banking sector is controlled by four banks, which in total have 75 per cent of all current accounts. Lloyds Banking Group has a 28 per cent market share, followed by Barclays at 14 per cent, Royal Bank of Scotland at 13 per cent and HSBC at 12 per cent .

The UK government is keen to see a greater diversity in the concentration of current accounts but apparently has not publicly indicated what targets it has set.

The BBC article seems to suggest that the government is keen to see people move away from the big banks and into smaller financial institutions to stimulate the competitive landscape.

The switching system is relatively simple, according to the BBC article. Account holders contact their new bank which will do all of the switching for them.

A website, simplerworld.co.uk, allows account holders to select a new provider from a list of banks that are participating in the switching system.