I recently decided to take a well-known bank up on their offer of a current account with an attractive set of perks – and so I began the much publicised 7 day account switching journey. As someone with a little knowledge of the payments industry I studied the process with both my personal and professional hats on and have a few observations from both sides.
As a consumer it was certainly made easy for me, I had been slightly worried as account switching day coincided with payday – gulp! But all went well, balances were transferred, old account closed and payments began to flow from the new account as expected. As far as direct debits and standing orders are concerned that has continued to be the case, I’ve had letters from most of my main household suppliers telling me they have noted the change of account details.
Where I make payments using a continuous authorisation on a debit card these payments have failed, for me this was payments to Spotify and Laithwaites, this is also the case for those businesses who hold a debit card on record for me to make payments against – Amazon 1-Click for example.
And so to the other side of the fence, what I know and think is happening in the background and what the implications are.
It would seem that direct debits are getting transferred and the suppliers for the main part are acting on the ADDACS notes they receive in month one. Apart from an increased admin burden on suppliers who need to make those changes and write to their customer, all is well.
There is an issue around continuous authorisations on debit cards, these are not transferred, but as the control of this type of payment is down to the supplier, it’s difficult to see how they could be in the current system. This is not highlighted to the consumer (it may be in the small print) and so issues may occur. Organisations who take payment in this way are likely to see an increased rate of payment failure due to 7 day account switching and may even lose business as consumers are given the opportunity to stop and consider if they really want those products and services.
Finally the issue of payday, at present it’s too early to tell if Experian my employer have has taken note of the AWACS notification they will have received and changed my bank account details on the payroll system. Unlike direct debit originators employers may take the view that keeping bank account data up to date is the responsibility of the employee, while the employee who has switched bank account may happily presume that it’s taken care of as part of the 7 day account switching service. For an initial 13 months after an account is switched, Vocalink are providing a service to re-route payments. And while it’s been suggested that they are likely to extend the time they provide this for, they are unlikely to do this indefinitely, where employers haven’t acted on their AWACS notification the point this service stops this is where payments such as salaries fail – think I’ll go and have a chat with payroll!
7 day account switching is one of the topics on our upcoming Payment Strategies webinar on 18th November – why not join us? Click here to find out more…