Some of us are old enough to remember when switching telephone providers meant changing telephone numbers. However with number portability, mainly driven by regulators, nowadays we consumers in many countries can seamlessly switch telecom (fixed line and mobile) operators, while retaining our telephone number.
Portable Bank Account Number
Why then, is this not yet fully possible with bank accounts more so when portability is already addressed by banks, for example, in their ATM networks where customers can avail services like cash withdrawal or balance checking from an ATM not belonging to their own bank’s network. Some argue that BANP exists in some form or the other in North America and Europe. But I believe these do not address the issue of actually porting the account number, which I define as eliminating any inherent link between the bank and the account identifier (example sort code and account number).
The 3 main challenges I see with BANP are (in no particular order of importance)
- Complex regulatory frameworks: As a side note, I would recommend reading Andrew Haldane’s speech “The Dog and the Frisbee” delivered at Jackson Hole in August 2012 http://www.bis.org/review/r120905a.pdf
- Cost, including updating every system involved in routing, applying, settling and financial accounting for each transaction between the two banks
- Security challenges including KYC norms
In spite of the above, BANP is being considered seriously by advocates mainly as a way to increase competition in the retail banking sector; thereby bringing in increased benefits to the customer through improved choice of products, transparency and ease of switching providers. Another argument I have heard , though not often, but I believe key in politicians convincing themselves of the need for BANP is, that banks can now fail and customers can be switched instantly to another bank.
But is BANP really needed?
Wouldn’t the benefits of BANP be simply negated by improved customer service? There could also be a strong case to be made that, the changes required to banks systems to make BANP work, would in fact, weaken the case for BANP, by making the customer experience better. An example would be the introduction of CASS in the UK.
It is banks, who must make investments for BANP. Looking at the return involved (example in 2014 in the UK just 6% of people switched accounts), I cannot see why BANP would be industry-driven. If BANP is to implemented in full, it will be a decision made by regulators and enforced by governments