600,000 switch account after change

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More than 600,000 current account customers have switched providers in the six months since a new guarantee to take the "fear factor" out of changing banks was launched.

The Payments Council, which is overseeing the new service, said there were 609,300 switches in the six months to the end of March, which represents a 14% increase on the same period a year earlier.

High awareness of and growing confidence in the current account switch service has helped to boost the numbers, the Payments Council said.

More than two-thirds of people (67%) in the UK are now aware of the initiative, which is up from 59% at the end of 2013. Customer confidence has risen from 58% to 65% over the same time period.

Under the switching guarantee, the new bank or building society the customer is going to arranges for all existing incoming and outgoing payments to be transferred and their old account is automatically closed as part of this process.

The guarantee has also cut the length of time it takes to switch from up to 30 working days previously to seven.

If anything goes wrong, the customer is entitled to be refunded interest and charges under the guarantee.

The Payments Council said that a central system which enables the old and new provider to swap information has been running smoothly, as has the redirection service. More than 99% of switches
that successfully start are completing in the seven-day timescale.

The switching service is free to use for consumers, small charities, small businesses and small trusts.

The success of the scheme is being measured against customer awareness and confidence in the service and its overall performance.

The Payments Council said that switching levels on their own are not deemed to be the best measure of success.

Gary Hocking, managing director of the Payments Council, said: "By making the current account switch service quick, hassle-free and removing the fear factor we've taken away the barriers customers told us they had when it came to switching.

"Six months in and the latest figures suggest people clearly seem to be getting the message that things have changed for the better.

"There's also been a noticeable surge of advertising activity from current account providers big and small, suggesting that the new service is helping foster competition and choice for customers.

"As time goes on and the track record of the new service builds, we look forward to these encouraging results continuing."

Banks and building societies have unleashed a flood of new current account perks since the switching guarantee was introduced, in the battle to tempt in new customers and retain existing ones.

Lloyds Bank has launched a current account which pays an interest rate of 4% on balances up to £5,000, while TSB, which split with Lloyds last year, recently unveiled a new current account paying 5% interest on balances up to £2,000.

The Co-operative Bank is offering people £100 to switch their main current account to it, plus it will make a £25 donation to charity.

Marks & Spencer plans to shake up the current account market further by launching its first "free" account this summer.

Meanwhile, Tesco Bank and Virgin Money also plan to launch current accounts this year.

To help people who have decided to change their current account, the Payments Council said they should firstly work out how they use their current account and whether they normally stay in credit or overdrawn.

It said switchers should make sure the details their old bank holds are up to date to avoid any delays and have a bank statement, with their current address on it, and a debit card ready when they switch.

Which? executive director Richard Lloyd said: "Despite an increase in public awareness and confidence, switching levels are still low, suggesting that the new seven-day service is not the game-changer that can significantly increase competition in banking.

"We're pleased the Government has responded to our calls to make banks release better data about current account running costs. If done properly this should help people more easily compare banks and find the best account for them, which will inject much needed competition into the market."

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