ONE recent announcement to hit the national press in the last couple of weeks is the introduction of the new seven-day switching service for bank accounts.

This was an initiative brought about by the banks as a result of continued pressure from parliament to introduce more competition into banking.

This is the start of changes for the banking industry. With so few banks (85 per cent of us bank with just four banking goups), there is little incentive for banks to compete. The result is the truly amazing statistic that on average we are more likely to get divorced twice than move bank account.

I did it (move bank) a couple of years ago and it was three months of hell.

The seven-day switching service means that you can go to a new bank and all your standing orders, direct debits etc will be moved from your old bank to the new one within seven days. But it is not perfect – you will still need to make sure this is all done and the service merely amounts to a redirection service.

A measure of success is how many more people will have switched account in a year’s time than would otherwise have switched. On this basis, I think this project will fail. I am pretty certain that people will not rush to switch their banks for the simple reason that most people will not see any benefit of moving from one big bank to another.

That is why many of us are still pushing for a new utility payments system that will result in full account number portability.

The nuts and bolts that makes money move from one account to another is complex. Meanwhile banks legacy IT systems – that date back an old punch card system from the 1950s – mean that there are still programmes running in banks that convert from the old £ Sh d system to decimal currency (a change that happened in 1971).

The upshot of all this is that banks’ IT systems are creaking (and breaking) with 80 per cent of IT spend being used on repairs and convergence of different systems.

With a move to proper, full account number portability and a new utility payments system that will come under a new regulator, the costs of starting up a new, innovative bank such as Metro Bank, Virgin Money or Tesco Bank becomes far cheaper.

With more attractive and diverse banks coming into the market place, banks will have to stop selling us stuff we don’t want or need and start to concentrate on customer retention.

And when they do that, we will start to see a sea change in banking standards.

CONTACT YOUR MP

  • Email: mark.garnier.mp@ parliament.uk
  • Telephone: 020 7219 7198 or 01562 746771.
  • Write: 9a Lower Mill Street, Kidderminster, DY11 6UU, or House of Commons, Westminster, London