Requerimientos del proyecto

6.40 All major PCA providers¹⁹⁴

6.41 The new switching service was designed to overcome one of the significant barriers to entry and expansion in this market - the difficulty

have signed up to the new switching service.

Despite this wide take up, for the new system to have a tangible affect on the PCA market, the funding of the new switching service should not impose any disproportionate costs on new entrants or smaller providers.

Consumers will also need to be made aware of its existence and trust that it will significantly improve the switching process.

194 Some smaller PCA providers will review implementation of the new switching service before deciding to sign up at a later date

in overcoming consumer inertia and concerns around switching provider.

It would be a significant concern to the OFT if the responsibility for contributing to the fees in the new switching service, as determined by the Payments Council and the existing PCA providers, were to act as a further barrier to entry and expansion.

6.42 The OFT is aware that Tesco Bank has raised concerns with the

Parliamentary Commission on Banking Standards concerning this issue.

In its submission to the Commission it noted that:

‘The ICB and government have been clear that CASS [the new switching service] must be 'be [sic] designed and implemented in such a way that does not impose disproportionate costs on new entrant banks, smaller players or direct debit originators' and that the service should be free for customers. It is our view that current switching fee proposals jeopardise these objectives by creating an additional barrier to success for new entrants, which threatens to undermine the consumer benefits of CASS.’¹⁹⁵

6.43 To that end, the OFT would have concerns over fees from this service being borne wholly by the new bank unless a very clear justification for this approach can be provided that takes into account the impact of this approach on competition in the market and barriers to entry. This is because such fees may represent a disproportionate burden on new firms entering the PCA market, or small existing providers seeking to expand significantly through the use of the new switching service. It is possible that the level of the proposed switching fee may impact on the business case for new firms to enter the market using the new switching service. This may lead to potential entrants seeking to enter without using the new switching service, or finding that entry is too costly and challenging.

6.44 In relation to advertising the new switching service, the Payments Council will be working with participating PCA providers to plan a

195 Tesco Bank submission to the Parliamentary Commission on Banking Standards, 17 December 2012.

significant advertising campaign in 2013 and 2014, so that the existence of the new service and what is offered will be widely advertised to consumers. Further, Bacs will be working with PCA

providers to develop best practice guidelines for managing the consumer experience and ensure customer-facing staff are trained to promote the service.

6.45 Our consumer survey also looked to assess the potential impact of the new service. We found that out of those consumers who have never changed their PCA, 28 per cent¹⁹⁶ agreed that the description of the new system would make them more likely to consider switching, with only four per cent¹⁹⁷ saying that the new system would make them less likely to switch. Further, out of those who have switched in the past, 36 per cent¹⁹⁸ said that they would be more likely to switch following the introduction of the new switching service. The Quadrangle survey also found that half of the consumers that it had asked viewed the

introduction of the new switching service positively, and believed it would improve consumer confidence in the switching process.¹⁹⁹

6.46 The OFT, therefore, considers that the new switching service could have a significant impact on the number of problems being encountered and it is possible that this may also affect consumers’ propensity to switch, as well as improve the wider perception of the switching process.

6.47 In addition to ongoing monitoring to ensure that any problems are dealt with promptly, the OFT recommends that the Financial Conduct

Authority or the Competition and Markets Authority carry out a review of the effectiveness of the new switching service once this has been in place for at least 15 months. As well as establishing that the system

196 Ten per cent of consumers said that they would be much more likely to switch under the new system, with 18 per cent stating that they would be ‘somewhat more likely’.

197 Comprising two per cent said they would be ‘much less likely’ to switch and two per cent

‘somewhat less likely’.

198 Twenty per cent of consumers who have switched said that they would be ‘much more likely’ to switch under the new system, with 16 per cent stating that they would be ‘somewhat more likely’.

199 Quadrangle research, page 41.

functions as expected, we anticipate that such a review would consider consumer interest and confidence in the system, and whether it results in consumers being more willing to switch when they are dissatisfied with their existing bank.