17,000 use switch code to swap banks

A banking industry code of practice on switching personal accounts had a successful first year, with 17,000 consumers using the code to change banks, according to an independent review by former telecoms regulator Etain Doyle.

Ms Doyle, who was commissioned by the Irish Bankers Federation (IBF) to review the switching code's first 12 months in operation, found that the number of consumers using the IBF code rose rapidly in the first few months to a peak of 2,000 a month, before levelling off to 1,000-1,500 a month.

The number who switched in the 12 months to the end of January 2006 represents a switching rate in the market of 0.5 per cent.

However, consumer research undertaken for the IBF in March by TNS MRBI has found that 5 per cent of respondents reported switching current accounts to a different financial institution during the previous 12 months, indicating that most people who switch current accounts do not use the IBF code.

This is because switchers often want to keep their old bank account open with their new one.

Under the IBF code, the old bank is responsible for transferring all direct debits and standing orders to the new bank. This process should be completed within seven working days, while the new bank must have the account up and running within 10 days of approving the switch.

Writing in the IBF publication About Banking, Ms Doyle said shortening the timeframes under the code would increase the number of late transfers, which had fallen over the year. The process would need to become completely automated for the timeframes to shorten, she said.

The IBF survey found some 45 per cent of those who switched accounts said the main reason was a better deal on fees and interest rates, while 23 per cent said they were unhappy with the service at their existing bank.

The IBF said yesterday that switching figures over the past three months had climbed back up to the previous peak of 2,000, which it said reflected recent competition in the market.