The Payments Council has announced a new bank account switching service that will start on the 16 September. We answer five questions on the new scheme.
What does the new service do exactly?
It enables current account holders to switch banks within seven days instead of up to 30 days.
As of Monday 16th September, 33 bank and building societies brands – accounting for virtually 100 per cent of the current account marketplace – will deliver the new switching service for consumers, small charities and small businesses.
How will it work exactly?
After the start date, when switching accounts the new provider will arrange for all direct debits and standing orders to be redirected to the new account. This system will stay in place for 13 months so no one off payments are missed.
Payments going in will also be redirected.
Why is the Payments Council launching this service?
It is being launched as a recommendation from the Independent Commission on Banking two years ago. The commission said that people only changed bank accounts once every 26 years on average.
As a result, the so-called "big four" High Street banks - Lloyds Banking Group, Barclays, Royal Bank of Scotland and HSBC - retain control over the market.
If it’s easier to switch, will banks be offering more incentives?
Yes! Two banks are already offering customers a cash incentive of up to £125 to switch their current accounts to them.
Will this new service provide a boost for smaller banks?
That’s one of the aims. Small banks taking place include the Reliance Bank, which is part of the Salvation Army – it has just one branch. Plus the Cumberland Building Society, which has 34 branches based across Cumbria and the north-west of England.