Joyce

Should banks embrace portable bank accounts?

Tools

One big advantage for banks when dealing with retail customers is that it's quite a chore to switch banks accounts, especially if there are a lot of direct deposit and direct withdrawals and such set up.

In the United Kingdom, this has been a big issue, one that the industry has decided to tackle via an industry-wide system to allow customers to make a change in just 7 days. "The new service will require banks and building societies to speed up the time in which they transfer accounts to rival providers and take responsibility for arranging all incoming and outgoing payments on behalf of customers," according to the Financial Times.

The newspaper also notes that as the industry faces pressure to deliver even more improvements in this area, some are pondering whether to link accounts to mobile phone numbers, creating an identifier that would be used to facilitate easily portable accounts.

A new industry-wide database set to launch in 2014 will do just that, something that might be used as a basis for a new portability system. As currently envisioned, the database will allow people to transfer money via text or app using just a contact's phone number instead of bank account details.

U.S. banks will be watching this closely. So far, portability hasn't heated up as a front-burner issue. But a recent survey found that 61 percent of consumers would favor easier portability. The industry has to tread carefully and fully analyze the consequences of instant portability.

For more:
- here's the article

- here's some background