- The document discusses improving the process of switching current accounts in the UK to increase competition in the banking sector. - While switching times have improved, the switching rate remains low at around 6-7% annually due to consumer perceptions that switching is difficult and risky. - Two proposed options to improve switching are full account portability, which would allow retaining the same account number when switching banks, and a central redirection solution to manage direct debits and credits. However, full portability faces significant technical challenges due to the UK's banking numbering system.

1. A New Dawn?
Seizing the Switching
Opportunity
Copyright © 2012 Accenture
All rights reserved.
Accenture, its logo, and
High Performance Delivered
are trademarks of Accenture.

2. Seizing the
Switching
Opportunity
In our view, the industry switching solution
proposed by the UK Payments Council will
deliver significant benefits to customers. But
to compete successfully under such a regime,
banks will need to rethink their products,
marketing and processes.
The Independent Commission on Banking (ICB) has joined other
regulators in the view that improvements to personal current
account switching processes would encourage greater competition
in retail banking. However, Accenture research reveals a perception
among consumers that switching is more difficult than it actually
is. This misconception helps to explain the current relatively low
switching rate and suggests that any solution should focus on
improving the consumer experience and addressing the perceived
difficulties with switching, rather than the underlying technology.
Seizing the Switching OpportunitySeizing the Switching Opportunity

3. Switching: back off the back-burner
In its final report in September 2011, the ICB
pinpointed current account switching as a
restriction on consumer choice in the UK, and
discussed how competition could be increased
if switching were made easier.
These concerns are not new. The difficulties
that individuals face in switching accounts
and the resulting impacts on competition were
raised by the Cruickshank Report in 2000.
Since then, the issue has been highlighted
by the OFT, the Treasury Select Committee
and the European Commission. And pressure
remains, with a number of initiatives in the UK
and EU targeted at making switching quicker
and easier.
Today, switching typically takes 18 days,
and the ease of switching has improved
significantly since Cruickshank. Yet switching
rates remain low. And with criticism of
switching processes by politicians and
regulators appearing perennial, the ICB has
now taken it back off the back-burner.
Difficult switching: perception or reality?
Customer behaviour makes it difficult to
measure switching rates accurately. Some
customers open a new account and then
switch gradually, running both accounts in
parallel. They often leave the old current
account open, using multiple accounts to
segment their finances or access overdraft
facilities. Some accounts just lie dormant.
Despite these barriers to measurement, there
have been several attempts to estimate
current account switching over a 12-month
period. These include Accenture’s 2011 UKI
FS Customer Survey, which indicates that
annual switching is running at around 6%. A
reasonable estimate of switching over the last
decade is in the region of 6% to 7% a year,
(see Figure 1).
While the UK’s “free-if-in-credit” model makes
it difficult to compare switching rates for
UK current accounts with other countries or
industries, the rate does appear low. Current
account switching rates across Europe are
typically around 2% higher and switching in
the UK in other industries is higher still, with
insurance, utilities mortgages, and fixed and
mobile telephone switching rates varying
between 17% and 47%1
.
Figure 1: Estimation of UK current account switching rates, 2002-2011
Sources: as stated
Seizing the Switching OpportunitySeizing the Switching Opportunity
20021
European
Commission
8% 8%
7%
7% 6% - 7%
6% 6%
9%
3% - 3.5%
3% - 11%
3%
20031
European
Commission
20041
European
Commission
20051
European
Commission
20095
European
Commission
20084
OFT
20062
National
Consumer
Council
20073
Mintel/
Bacs
20106
Bacs
20117
Treasury
Select
Committee
20118
Accenture
Customer
Survey
12
10
8
6
4
2
0
Range of evidence to TSC
1
European Commission “Retail Banking Survey” in Sector Inquiry on Retail Banking. Interim Report II: Current Accounts and Related Services:
http://ec.europa.eu/competition/sectors/financial_services/inquiries/interim_report_2.pdf
2
http://collections.europarchive.org/tna/20080520143211/http://www.ncc.org.uk/nccpdf/poldsocs/NCC107rr_switching_findings.pdf
3
Mintel, ‘Current Accounts’, June 2007; Bacs Family Finance Tracker
4
http://www.oft.gov.uk/shared_oft/reports/financial_products/oft1005d.pdf
5
http://ec.europa.eu/consumers/strategy/docs/3rd_edition_scoreboard_en.pdf
6
Bacs Family Finance Tracker
7
Evidence provided to the Treasury Select Committee detailed in its report on Competition and choice in Retail Banking:
http://www.publications.parliament.uk/pa/cm201011/cmselect/cmtreasy/612/61202.htm
8
Accenture UKI FS Customer Survey 2011
1
Switched on to Switching, National Consumer Council, 2005.

4. • Figure 3 shows of those that switched their
current accounts, two-thirds declared the
experience both “fast” and “easy”, while
nearly three quarters said switching was
“worth it”. However, evidence shows that
processes still require improvement, with
almost one-quarter claiming to have had
“problems” when switching.
• Although 23 % of switchers experienced
problems, more than twice as many
anticipated them. As switching improves,
and fewer customers find themselves
labouring under misapprehensions about the
process, switching could rebound sharply and
permanently, requiring banks to pay specific
attention to customer retention.
Restricted competition or happy customers?
High levels of switching are generally seen
as indicative of healthy competition, so the
low rate of current account switching is often
regarded as indicating either that competition
in the sector is limited, or that customers face
difficulties in switching. However, it may also
mean that customers do not wish to switch.
Accenture’s research indicates that, of the
overwhelming majority of individuals who did
not switch accounts in the past year, 90%
remained loyal to their bank because they had
no desire to change provider. The remaining
10% wanted to switch, but were concerned
that switching was either too risky or too
much hassle (see Figure 2).
In reality, the low level of switching is
likely to reflect a combination of all three
deterrents: perceived hassle, the risk of things
going wrong, and reasonably high customer
satisfaction. But when considering whether
improvements to switching processes are
needed, it is the real or perceived difficulties
that are critical. In our research, only 58% of
switchers said switching was problem-free.
Customers’ nervousness underlines that
where problems do occur such as failure to
transfer direct debits they can have serious
consequences. So switching would probably
increase if customers had greater confidence
that the process was as safe and simple
as possible. Even more importantly, the
customer experience would improve. So it is
worth examining the viability and impacts of
changes to improve switching.
50%
37% 37% 36%
29%
24%
20%
Too risky Takes
too long
Might end up with
worse provider
Too much
paper work
Banks all the same Habit Benefits not worth it
#1 reason for not switching, 2011
Figure 2: Top reason for not switching accounts despite wanting to
Source: Accenture 2011 UKI FS Customer Survey
Figure 3: Assessment of switching experience, 2011
Source: Accenture 2011 UKI FS Customer Survey
Seizing the Switching OpportunitySeizing the Switching Opportunity
Switching was SLOW
Switching was DIFFICULT
I had PROBLEMS when I switched
I DIDN’T KNOW who to switch to
Switching was NOT WORTH IT
64% of switchers said the process was FAST
66% of switchers said the process was EASY
58% of switchers had NO PROBLEMS
76% of switchers KNEW WHO TO SWITCH TO
72% of switchers said the process was WORTH IT
37%
36%
50%
37%
20%
13%
23%
7%
9%
10%

5. Current Account Switching
Ways to improve
switching
There are two ways a customer
can switch a current account:
switch it themselves, manually
transferring their balance and
direct payments; or use a bank
switching service, where the
receiving bank manages elements
of the switching process.
People considering switching are most
concerned about hassle (including the
length of time taken) and the risk of errors.
Two options to address these problems are
generating particular interest: full account
portability, and a central redirection solution.
Since the cost of any improvements to
switching will ultimately be borne by the
customer, we believe it is important to focus
on how these options would affect the
customer experience, relative to the cost.
1. Introducing full account
portability
Full account portability allows an individual
to move their account from one provider to
another, complete with all direct debits and
credits, while also retaining their account
number. This is often seen as similar to
mobile phone switching. But there are three
fundamental differences between a bank
account number and mobile telephone number
from a full portability perspective:
• Mobile providers start with a ‘clean’ account,
and no risk of retrospective transactions
being due on the closed account
Seizing the Switching OpportunitySeizing the Switching Opportunity
• The benefits of a unique transferrable bank
account number are less apparent. An
individual changing their telephone number
has to alert friends, family and business
contacts. With a bank account, only a small
number of individuals and/or businesses
need to be told
• The routing process for payments to bank
accounts includes bank specific sort-codes.
This means the unique identifier for a bank
account is 14 digits (six digit sort code and
eight digit account number). It is perfectly
possible for identical eight digit account
numbers to exist on different sort-codes.
Full account portability would require
unique combinations of sort codes and
account numbers from a central industry-
wide database. To allow the industry to
continue to route payments between banks,
an alternative mechanism would need to be
put in place, requiring significant industry
investment, quite possibly also incurring
the need to re-allocate individuals’ account
numbers anyway
Overall, this is the more complex and
expensive of the two solutions on the table.
2. Creating a redirection service
The UK Payments Council has proposed
an alternative solution: an industry-wide
commitment that consumers and small
businesses will be able to switch bank accounts
in seven working days including new cards,
PINs and cheque books with payments into the
old account redirected for a fixed period.
Adoption of this solution would require banks
to assess the readiness of their operations, IT
and processes, and act to address any gaps.
The necessary steps would include:
• Reviewing switching processes and
identifying simplification opportunities prior
to IT changes
• Monitoring switching lead times and
determining the root-causes behind
variability
• Defining account switching value streams
and identifying bottlenecks
• Identifying non-complex, paper-based
activities for automation
Table 1 summarises the issues and
enhancements to current switching processes,
and maps these to the two options. In our
view, the UK Payments Council’s suggestion is
the only truly viable route.
Customer
Switching
Proposition
No industry wide
guaranteed
switch time
Average of 18 days
to switch
High variation in
switching time
among banks
Initiation and
Transfer Support
Variation in
correctness /quality
of data being
exchanged in the
switching process
Transferable
Account Number
Customer issued
with new account
number
CurrentDrawbacks:PotentialEnhancements:
Redirect payments
for a period of up to
13 months
Automated
balance transfer
built into the
switching process
Customer retains
account number
UK Payments
Council Proposal
Full Account
Portabillity
UK Payments
Council Proposal
Full Account
Portabillity
UK Payments
Council Proposal
Full Account
Portabillity
UK Payments
Council Proposal
Full Account
Portabillity
UK Payments
Council Proposal
Full Account
Portabillity
UK Payments
Council Proposal
Full Account
Portabillity
Full Account
Portabillity
Addressedby:
Direct Credits and
Other Inbound
Payments
Inbound credits (e.g.
salary) may continue
to be paid into the old
account whilst bills
are being debited from
the new account
Direct Debits, SOs
and Bill Payments
Billers continue to send
Direct Debit collection
requests to the old
account
Participants under the
current switching
scheme fail to
exchange list of DDs,
SOs Bill Payments
within the 3 day SLA,
causing delays in the
process
Balance of
Account
Old bank slow to
release outstanding
balance of account
to ensure pending
payments can be met
Cheques
Outstanding cheques
on old account cleared
after completion of
transfer may bounce
Switcher guarantee
with max switching
timeline of 7 working
days
Scheme and common
process / rules for all
banks to follow
Improve and standardise
IDV process e.g.
removal of wet
signatures
Improve data quality
and standardise
information exchanged
Remove unnecessary
process steps causing
delays
Direct Debits will be
collected from new
account from day 7
Participants are
bound by enhanced
scheme rules and
monitoring of SLAs
Cheques drawn would
be returned to the
collecting bank that
would then forward
the cheque to the new
account
Table 1: Drawbacks and possible enhancements under the two proposed approaches

6. Accenture Contacts
Otto Benz
Senior Executive
Financial Services UK
+44 20 7844 4525
otto.benz@accenture.com
Kim Berg
Senior Manager
Financial Services UK
+44 20 7844 5980
kim.berg@accenture.com
Karl Meekings
Manager, Banking Research
Financial Services UK
+44 20 7844 5530
karl.meeking@accenture.com
Seizing the Switching Opportunity
Seizing the switching opportunity
Whether or not full account portability is
pursued, the UK Payments Council’s proposals
would radically transform customers’
switching experience. By tackling many of the
concerns of customers who want to change
provider, the effect could be to double the
volume of switching. With implementation of
the UK Payments Council’s changes scheduled
for 2013, banks must ask themselves some
key questions now to ensure they remain
competitive and profitable.
For example, in products, they need to
reassess the competitiveness of their current
account offerings; decide whether changes
are required to pricing to ensure profitability
post-operational and IT changes; and examine
opportunities to develop new products to
capture additional profitable customers.
And in marketing and communications,
banks should review their customer retention
initiatives to improve loyalty and manage
higher churn; launch marketing campaigns
about their new portfolio of current accounts
to inform and acquire consumers; work out
how to use the increased transparency in the
banking market to compete more effectively;
and leverage marketing information and
analytics to improve customer offerings.
Conclusion
Our research underlines that changes do
need to be made to improve the perception
and customer experience of current account
switching. These would not only create a
better service for customers, but may also lead
to enhanced competition across the sector.
The industry is already committed to
improving the process significantly by
introducing a central switching facility.
However, since the cost of any improvement
in service will ultimately be borne by the
customer, the industry and policy makers
need to weigh up the cost against the
perceived benefits when considering further
improvements.
What is clear is that the switching process
will change dramatically over the next two
years, creating operational and IT challenges
for banks. However, the good news is that
banks can seize opportunities presented by
easier switching to deliver better customer
experiences in a competitive environment.