more than a million bank accounts have been switched since the banking industry introduced its guaranteed seven-day switching service a year ago this week.
The main driver of the switches appears to have been the higher interest rates and other financial benefits being offered by the likes of Santander and TSB as competition between the banks has increased.
At the same time there has been renewed criticism of the banks for their lack of transparency and use of cross-subsidies. Further research has been demanded into whether cross-subsidisation benefits consumers across all income groups.
Making it easier for people to switch has been seen by regulators as a key step to improving competitiveness in the current account market.
Prior to the introduction of the seven-day switching service last year, it took an average of 18 to 30 days to move an account from one bank or building society to another. Now personal and small business current account customers can choose the date they want to switch from their old bank to a new provider so there is no break in service, because the old account stays open until the switch date.
A redirection service is also part of the new service, capturing any payments made to or taken from the old account and redirecting them to the customer's new account. If anything goes wrong, customers will be refunded interest or charges.
Mark Bowerman of the Payments Council, which has overseen the new scheme, said: "It has given customers a lot more confidence and certainty about switching than they had before."
However, many experts believe the financial rewards some banks have been offering over the past year have been a more powerful incentive than the switching service.
Andrew Hagger of Moneycomms said: "Most people are not looking for lots of bells and whistles on their current accounts, but with savings rates so poor they have been attracted by the deals being offered by the likes of Marks & Spencer, Tesco and TSB."
Kevin Mountford, head of banking at comparison site Moneysupermarket, agrees. "Our research shows high in-credit interest rates are the main driver for encouraging people to switch current accounts, no doubt fuelled by the fact savings rates are so low at the moment.
"The implementation of seven-day switching last year stoked the fire in the current account market, with many providers stepping up offers to entice consumers to switch."
Moneysupermarket's research found more than one- quarter of consumers (27 per cent) on its site who were looking for a new current account over the past year have been looking for in-credit interest.
It points out savvy consumers can currently earn three times more interest with one of the top paying current accounts than with a top easy-access savings account.
A survey by TSB also found financial benefits were top of the list for one-third of switchers (33 per cent), while the second key driver, influencing more than one-quarter (26 per cent) of people to switch bank accounts, was their dissatisfaction with their old bank.
TSB and Nationwide offer the top interest rates of five per cent on their current accounts. With Nationwide's FlexDirect, five per cent applies to balances up to £2,500, while TSB Classic Plus Account also offers the same rate on balances up to £2,000.
The advantage with the TSB account is that you do not have to switch your existing account, although you have to make a minimum monthly deposit of £500. There is no time limit on the interest.
At Nationwide there is a £1,000 funding requirement and an element of smoke and mirrors, as the five per cent rate is only paid for the first year, after which it drops to one per cent.
For people with larger savings pots, Santander's 123 account may be a better option as it pays three per cent on balances of between £3,000 and £20,000. It also offers cashback on utility and mobile phone bills. These benefits should outweigh the £2 monthly fee on the account.
Attracting new clients is important to all banks because of the cross-selling opportunities this provides, says Rachel Springall of financial information group Moneyfacts.
"Current account customers often remain customers for life and can be sold other products such as insurance and mortgages" she says.
Several banks are claiming success in the switching stakes. Halifax claims to have won about one-fifth of the switchers over the past year. Nationwide says that just in excess of 100,000 customers "have flocked" to its account, though it is not revealing how many existing customers have gone elsewhere.
Meanwhile, Santander says it has notched up 250,000 current account switches since the current account switching service was launched.
More people may decide to switch in future, according to private banking software provider GMC Software Technology. Mike Davies of GMC predicts: "Seven-day account switching will really come into its own when private banks start offering current accounts for all in 12 to 36 months' time." The company says better technology being introduced by these banks will enable them to lower their income and asset requirements and they will be looking to attract more customers for their wealth management services.
Meanwhile, the Financial Services Consumer Panel has thrown a cat among the pigeons.
In a discussion paper published early this month it argues consumers do not understand the real price they are paying for their "free" banking because of the lack of transparency and cross-subsidisation. It has called on the Competition and Markets Authority to conduct a fuller investigation into cross-subsidies for personal current accounts.
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