The UK Payments Council-backed Current Account Switch Service (CASS) has gone live, promising to let the UK's 46 million current account holders to move between banks in seven days or less.
The launch of the service is part of government aims to enable greater competition in the financial services industry by removing barriers for those wishing to move between banks.
The service promises to reduce the time needed to switch from the current average of up to 30 days down to seven days, and will automatically transfer any payments made to the old account over to the new one for a period of 13 months, with a notification sent to the sender and recipient to update their details. If the account details have not been updated after this point the payment will be rejected and 'bounce'.
A total of 17 high street banks and building societies have signed up to the service from launch, including Lloyds Banking Group, Nationwide, Santander, as well as challenger banks such as Co-op, Metro Bank and Virgin Money, with more to follow in 2014.
Investment in IT
The service is a result of a £750 million investment by the financial sector, the majority of which has been spent on changes being made to banks' internal IT systems and processes. Around £100 million of this covers the development, delivery and running of the central IT platform over the next five years.
The central CASS system operates on an entirely new, custom-developed IT platform based on the ISO 20022 message specification, the international standard for exchanging financial information. This allows the switching service to be automated for most banks. The re-direction service will be operated for Bacs and run on VocaLink systems, the Payments Council said.
The plans stop short of proposals for full account portability, which would offer customers even greater flexibility in moving between banks, linking their account details to their phone number. However the proposals would involve significantly more investment from banks than the seven-day account switching service, with estimates that costs to set up the necessary IT infrastructure could run into billions of pounds.
The CASS system was set up following recommendations by the Independent Banking Commission in 2011, and forms part of plans to create greater competition amongst UK banks and encourage movement away from the 'big four' banks - Lloyds Banking Group, Barclays, HSBC and Royal Bank of Scotland.
A recent report from CEBR and Metro Bank claimed that the introduction of the account switching service could see the levels of movement between providers doubling in coming years. Meanwhile a SAS and YouGov report indicated that five million account holders are likely to make the jump in the next 12 months.
Commenting on the launchof the service, Craig Donaldson, CEO of Metro Bank welcomed the introduction of the service which will help newer entrants to the market gain current account market share.
"The new switching rules are a good step forward for the banking sector and will help to foster a more efficient and competitive market for consumers," Donaldson said.
"At the moment, far too many people put up with poor service from their bank simply because they believe switching to be too complicated. CASS is a great first step to improving consumer confidence in switching."