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Andrea Leadsom: Further and faster please, Greg Clark, on bank account number portability

Leadsom AndreaAndrea Leadsom is the Member of Parliament for South Northamptonshire. Follow Andrea on Twitter.

I couldn’t agree more with Greg Clark’s ConservativeHome column this week. It’s imperative that we re-establish the UK as the global leader in financial services. I’m therefore right behind everything Greg is proposing. My only plea is that he should go further and faster.

Specifically, I urge him to introduce full bank account number portability in the Bank Reform Bill. Doing this would mean bank customers could instantly switch between banks and if they wanted they could take their bank account number with them. Like when you change mobile phone provider, and take the telephone number with you, you shouldn’t have to face the hassle of changing bank details when you move. Bank account number portability would radically improve choice for customers, force banks to give better service, and encourage new entrants to the market.

I agree with the Minister that our financial services industry is critical to our economy; he is right to legislate to create a stringent supervisory regime so that banks can no longer look to the taxpayer to bail them out; he is correct that banks need to act in the best interest of consumers; we should have greater competition in the sector; and we should lead the world with our consumer financial services – but I think a real game changer would be bank account number portability.

One of the most striking aspects of the financial crisis, and more recent scandals such as LIBOR rigging, was the lack of choice that ordinary people felt when faced with a tableau of institutional failure. Much has been made of the regulatory shortcomings that contributed to these problems, and public opinion often reflects on the actions of government and regulators. However, not nearly enough attention has yet been directed at the competitive environment itself. And a competitive market is one of the best ways to ensure these problems are not repeated.

In 2000, there were 41 major British banking groups and subsidiaries, whereas in 2010 there were just 22. Four banks have an almost 80% market share of both the personal current account and SME lending market, so there is clearly a need for comprehensive action to increase competition in Britain.

The technology already exists for bank account number portability – achieving access for all banks to a shared payments system, regulated independently (rather than by the banks themselves, as is now the case) and which is equal, fair and transparent would not be nearly as expensive as the big banks make out. It would give new banks a chance to compete on a level playing field.

For customers, the ability to switch provider instantly and without the fear of having to change every detail of their account, would make it much more attractive to change provider. The possibility of instant switching and more entrants to the market would mean banks would need to differentiate their offering and service levels in order to retain customers, rather than relying on inertia.

The dangers of ‘too big to fail’ would be significantly reduced by bank account number portability. Accounts could be transferred instantly from failed institutions to sound ones, so a future bank collapse could be efficiently resolved.

Full bank account number portability will also mean the risk to the taxpayer of having to foot the bill for the mistakes of the banks again, will be reduced; it will increase competition in the sector and greatly improve customer service; and if we act now we can continue to lead the world in financial innovation.

Greg Clark’s article shows yet again what an excellent job the Chancellor and his team are doing to put right the appalling damage which Labour inflicted on the financial services sector. I hope this chance to go even further in improving competition will be seized by the Treasury.


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