James Daley

By James Daley

It's a year now since the banking industry introduced its seven day Current Account Switching Scheme - during which time, the Payments Council tells us, there's been a 22% increase in the amount of people switching bank accounts to just over 1.2 million.

That may sound impressive, but when you put it in the context of the fact there are over 72 million bank accounts in the UK, what we've actually seen is an increase in the level of switching from about 1.4% of the market to 1.6%. Hardly a revolution. For comparison, around 9% of people switch their mobile provider every year, and 6% switch their home phone. The banking sector has a long way to go until it is anything close to approaching competitive.

Rewarding failure

One of the tangible benefits of the new switching scheme, however, is that it's now possible to see who's winning and who's losing in the current account switching stakes - with the Payments Council publishing regular sets of data.

Today's numbers are a bit depressing. While the banks losing the largest number of accounts are the big four - Natwest, HSBC, Lloyds and Barclays - the main beneficiaries have been Halifax and Santander, both of which have below average customer satisfaction ratings.

It's clear to see why these two are cleaning up. They spend the most on TV advertising, and they have accounts that come with generous rewards. Halifax will pay you £5 a month if you stay in credit, as well as an extra £100 for making the switch. Santander will give you cashback on your spending, as well as a preferential interest rate on your account balances.

But these banks are, frankly, not amazing when it comes to service.

If customers continue to choose banks based only on pounds and pence, it lets them off the hook on the important business of treating your customers well and ensuring they have good IT systems which don't break down.

The top three bank account providers in Fairer Finance's tables are Metrobank, Norwich & Peterborough & Nationwide - yet these have picked up a fraction of the switches taking place. Nationwide is at least a net beneficiary - but it should be the one cleaning up.

If it's cash in your pocket that's important - then First Direct will pay you £100 to switch - another brand with great service.

Portable account numbers

The bigger problem remains, however, that too few people are making the switch in the first place. Giving everyone a single account number that can be transferred from bank to bank is the only way to get switching levels from 1.5% to 10%. It would, overnight, remove the biggest barrier to switching - which is the fear that something will go wrong and that it will be a hassle.

While the Payments Council is doing a great job at spinning the figures to show that the current account switching scheme has been a runaway success, the truth is that it's barely scratched the surface.