Number’s up for my ‘prehistoric’ bank account
As reform looms in the personal banking sector, one frustrated customer explains why change can’t come soon enough
BANKING in Britain is changing. Next month we will see a glimpse of the future when proposed improvements are announced – affecting anyone with a current account. The Mail on Sunday reveals what is on the cards, why it is important to switch – and how to measure the value of your account.
FUTURE OF BANKING
DETAILS from a major ongoing investigation into retail banking show that current accounts paying interest are becoming more popular, while packaged accounts with insurance add-ons are falling out of favour. But too few people change their bank accounts over time.
The final report on the banking sector by the Competition and Markets Authority is due in April next year.
But early conclusions will be published next month, along with suggestions for how current account banking might be improved. Some major banks may be forced to sell part of their branch networks to improve competition. A standard way of charging for overdrafts may also be recommended, making it easier to compare deals.
Andrew Hagger, of financial research company MoneyComms, says: ‘I hope the report will recommend more than a little tinkering around the edges and will give more customers the confidence to switch.
‘For many people their current account is the bedrock on which all their finances depend and it is seen as a big deal to move it.’
There could also be a push towards portable current account numbers – akin to taking the same mobile number to a new network provider when switching mobile phone deals.
Hagger says the report could trigger the end of ‘free’ banking – where no charges are applied provided you stay in credit with your bank.
WHY CHANGE IS NEEDED
SWITCHING current accounts between providers keeps banks in competitive mode and increases choice, which works well for consumers.
By comparison, a banking sector riven by apathy means a small number of banks with high market share can take financial advantage of their customers, knowing they won’t bother to leave.
The regulator’s study so far estimates that the annual rate of switching among personal banking customers is just three per cent.
But there is a clear trend among switchers towards interest-paying accounts. The share of people opening this type of account for their main day-to-day banking jumped from 10 to 37 per cent between 2011 and 2014. Last year 1.2 million interest-paying accounts were opened.
Packaged accounts, also called ‘added value accounts’, which typically include insurance policies for travel, mobile phones or car breakdowns and charge a monthly fee, are not faring so well.
The share of people opening one of these as their main account has fallen from more than 10 per cent in 2011 to less than 5 per cent last year. There has also been a significant rise in the number of complaints about these accounts to the Financial Ombudsman Service in the last year.
Despite the introduction of the Current Account Switch Service, which marks two years of operation this month, hurdles remain preventing healthier levels of switching.
James Blake, chief executive of Hello Soda, a social data analysis company, says: ‘Over-reliance on paper based identification makes switches more difficult and time consuming.
‘We are transacting more through our mobiles, computers and tablets. Data that proves our identity is contained within these systems now.’
Tayler Waldock has experienced the frustration of trying to open a new account without the right paperwork – and describes current practices as ‘prehistoric’.
In June she tried to open a new account with Barclays while still keeping hold of her graduate account with Santander.
A normal requirement to open an account is photo identification and proof of address – such as a bill or bank statement. But the 22-year-old office manager rents accommodation with friends in Manchester and all bills are included.
Also, as a student she moved house every academic year, so her bank statements still go to her mum’s address where they were shredded for security. ‘I had no bank statements and no bills,’ says Tayler. ‘I tried using my tenancy agreement, but this wasn’t accepted.’
Tayler changed her address on the Santander account so she could
prove where she lived, but this too required paperwork and the showing of her passport, which meant further delays. ‘Social media is a trove of information that businesses should be able to tap into to verify someone’s identity,’ says Tayler. ‘Paper is prehistoric.’
Blake says banks need to ‘wise up’ to the issues that frustrated Tayler. He says switching is unnecessarily clunky – especially for students and young professionals who do not have a strong credit history.
He adds: ‘Banks can prove a person’s identity through their social media profile in minutes using the appropriate computer software.’
YOUR ACCOUNT’S VALUE
TO determine whether an existing account is good value, a customer needs to check whether it best meets their financial behaviour. Those who keep their accounts in the black should ensure they are receiving rewards or interest.
Those who travel regularly would benefit from low or no fees being applied when they use a debit card overseas. Those who are constantly in the red need to ensure they have an account that offers generous overdraft terms – a feefree buffer for example.
To check for each of these types of account use a comparison website such as MoneySuperMarket.
Rival Gocompare provides a special tool that matches people to the account right for them. This could help when looking at overdraft facilities, which are difficult to compare because banks and building societies charge in different ways. Interest charges, daily or monthly fees, or a combination of these might apply. To compare accounts based on the value of customer service visit specialist comparison websites such as Fairer Finance or Move Your Money.