Account switching explained – a new guaranteed service for the UK

The Payments Council

The wide-ranging report published in 2011 by the Independent Commission on Banking recommended ways to give greater confidence to customers switching their current account to a new bank or building society, and to make the process easier for them.

At the Payments Council – the organisation that sets the strategy for payments in the UK – we have worked with banks, building societies and other payment service providers on the introduction of a new, comprehensive account switching service. It will enable customers to switch accounts quickly and easily from one bank to another, all backed by a guarantee that details the benefits that the new bank will offer as part of a switch.

The new service will launch in September 2013; here we look at what the service is and how it will work.

Seven working days from start to finish
From September, switching current accounts will take seven working days to complete. This means that if the switch date chosen and agreed with the customer’s new bank is on the Tuesday of a particular week, the switch process will start on the Monday of the week before (assuming there are no bank holidays in between). Customers need not worry about transactions going missing while the switch is progressing: the first six days are dedicated to gathering and verifying all the necessary information, and setting the details up on the new account, during which time their old account continues to operate as normal. The actual switch takes place on the switch date, the seventh working day.

New technology
The account switch service operates on an entirely new, custom-developed IT platform based on the ISO 20022 specification. (ISO 20022 is an international message standard for exchanging financial information.) This means that, for many banks, especially the main high street banks, the entire process can be automated. For smaller banks the service provides a web-based alternative, but the two channels are entirely integrated: meaning that any bank subscribing to the service can switch an account from any other member bank – and they all use the same central, shared infrastructure to do so.

Every account holder can safely benefit
The banks joining the service cover virtually the entire UK current account market, from the largest of the conglomerate high street retail banks to smaller, specialist banks, and everywhere in between. The service has been designed from the ground up to be highly secure and an enormous amount of effort has gone in to ensuring that a switching customer’s identity and profile will be verified down to the last detail, to detect and protect against fraud.

Not just a transfer of Direct Debits and standing orders
Account switching is not only a transfer of the Direct Debits and standing orders from a customer’s old account to a new account; that service exists today. The new service delivers a great deal more than that.
The details of any beneficiaries (people or organisations that individuals pay via internet or phone banking) will also be transferred; and if any single future-dated payments are due to be made from the old account after the switch date, these will be set up and paid from the new account automatically.

Moving your account balance
The balance that exists on the old account will be transferred automatically to the new account on the switch date. The service even provides the ability for the new bank to cover a negative balance (an overdraft) on the old account, although this is subject to agreement between the customer and their new bank. Following the transfer of the balance, the old account is closed.

Redirecting payments
Any payments that are made to or attempted to be taken from the old account will be redirected automatically to the new account for 13 months after the switch date. In fact, customers don’t personally have to tell anyone they’ve moved banks: if anyone tries to pay money into the old account, the payment will automatically be redirected into the new account without any delay at all – customers will continue to receive the money just as quickly as if it had been paid directly into the new account. The person or company paying into the old account will be made aware that the account has been switched and of the new details, so that any subsequent payments can be directed to the new account rather than the old one.

This is true for every kind of payment: from automatic salary payments from employers, to friends transferring money via online banking, to someone sending a cheque or cash payment to the old bank by post, or someone sending a transfer from overseas.

This redirection or forwarding is not just true for payments coming in. Apart from Direct Debits, which customers have personally signed up for (such as your mortgage payments, or insurance premiums), there are many other ways that payments go out of accounts. For example, before a customer switches accounts they may have posted a cheque to pay a bill, which is not cashed until after the switch: in this situation the cheque will be sent to the new bank instead for clearing, just as if it had been a cheque from the new chequebook.
The ‘partial-switch’ option

Of course a fully-featured account switch is not necessarily for everyone. The programme also provides for the need to switch all or even just some of the Direct Debits and standing orders from one account to another, without transferring balances or redirecting payments. This service is known as a ‘partial switch’ and extends the scope of the account switching service to larger corporate accounts, as well as to consumers who may not wish to close their old accounts. It operates on the same secure platform and draws from the same message set as the full switching service.

The launch date is fast approaching
The new account switching service launches to the public in September 2013. A new era in UK retail banking dawns…