Switch and save, finally

Three years after the switching service was supposed to make it easier to leave your bank, the industry is given a year to finally get it sorted.

Where do you put yours?: Bacs has a year to sort out switching (Picture: mkos83/istock )

Current account customers should find it easier to ditch their bank if they are not happy under moves to clear some of the barriers to finding a better deal.

The Competition and Markets Authority (CMA) has accepted undertakings from payments body Bacs, which owns and operates the current account switching service, to deliver improvements to the service within a year.

A previous investigation by the CMA found someone could save £92 a year on average by switching to a deal that better suits their needs. Savings of around £80 a year on average are available for small businesses by ditching and switching.

But currently, only 3% of personal and 4% of business customers switch to a different bank in any year.

The current account switching service was introduced in 2013 to take the hassle out of moving banks. The service has cut the length of time it takes to switch to seven working days. All outgoing and incoming payments are automatically moved over to the new account and payments accidentally going to the old account are redirected for a minimum of three years.

As part of the agreed improvements, Bacs has already extended the redirection period for stray payments going to the old account. The redirection service is now in place until there is a gap greater than 13 months since the last redirected payment.

It is thought customers' nervousness about payments accidentally going to their old account was holding some people back from switching.

More will also be done to raise awareness of the switching service, particularly among those who could benefit the most. This could include people who are overdrawn, and at the other end of the scale, people with large amounts of cash sitting in their current account, which is perhaps making little or no interest.

Bacs will also work with current account providers to ensure that a decision on overdraft provision is given before a switch is initiated. Some customers may fear they will not get the same level of overdraft as they do now if they switch.

Alasdair Smith, chairman of the CMA retail banking market investigation, said: "Switching is the key way for people and small firms to find better banking deals and save money. Improvements to the switching service will give customers better information about, and so greater control over, their finances. This in turn will make it easier to move their money and capitalise on better offers."

Anne Pieckielon, Bacs' director of product and strategy, said: "We are pleased to formally commit to the CMA's undertakings and look forward to continuing to work closely with them, and all of our stakeholders, in the coming months as we deliver further improvements in the current account switching space.

"While today marks the official signing of terms, the reality is that the Bacs team has been working hard for some time to deliver against these undertakings."

A customer satisfaction survey from consumer group Which? has found banks still need to do more to improve their day-to-day services, particularly when it comes to being clear about fees and charges.

The Financial Conduct Authority (FCA) recently said it is putting overdrafts under the spotlight as part of a probe into the high-cost credit market.