Current account switches made easier as banks plan media blitz

Government promotes new £750m IT system that allows customers to swap banks quickly to promote competition

A cast of animated characters will hit television screens in September as part of a campaign by the banking industry to encourage customers to switch bank accounts.

They will also appear in newspapers, magazines and on billboards as banks strive to prove that they do not need a full-blown competition inquiry to get customers to move current accounts.

Under instruction from a government keen to foster competition on the high street, the banks have spent £750m designing a new computer system that allows them to speed up the time it takes to shift current accounts between each other. The change could break the stranglehold that the big four – Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC – have on the current account market.

Such is the sensitivity around the programme and the determination to ensure it is not accused of being behind schedule that the payments council, which is overseeing the process, refuses to disclose when the switching service will begin. But the 30 banks and building societies participating in the project are embarking on last-minute system tests to allow the service to begin on 16 September. The service guarantees that accounts can be transferred in seven days without glitches.

On Monday the payments council wrote to the government to reaffirm that it is on track. Any suggestion that the project is falling behind schedule is quickly quashed by bankers amid rumours that banks have back-up systems where they deploy staff to change direct debits manually. One senior banker said: "We have so little credibility left, this is going to be a big chance to put it right."

The plans hope to encourage customers to move accounts and make banks offer a better serviceThe switching service was spun out of the review by Sir John Vickers in his independent commission on banking, which found there was little movement between customers of the big four, which have a combined market share of 80%. It allowed the banks to head off a move to account portability – more akin to moving a phone number between mobile phone providers – which they argue is expensive.Last month's parliamentary commission on banking standards put portability back on the agenda and the government will commission a new review next year.

A functioning switching system will be the banks' main defence against portability. This government is not the first to try to bolster competition. More than a decade ago Labour tasked Don Cruickshank, former head of the then telecoms regulator, with investigating the banking industry and he, too, highlighted the problem. Since then the business has become even more concentrated in the wake of Lloyds' rescue of HBOS, the main challenger, five years ago.

Ian Gordon, banks analyst at Investec, said: "It has been an objective for ever, with limited success. I see this as a means to attempt increased portability of current accounts. Whether it will succeed I'd be a little bit sceptical because of entrenched consumer behaviour."

Motivating customers to move accounts could be one way to change behaviour. However, a statistic bankers often quote is that people are more likely to divorce than to switch the provider of an account into which salaries are paid and direct debits paid out. Bankers acknowledge there is a danger that customers end up moving their accounts among the big four, doing little to change the market share the government is trying to break, unless new-style products are brought to market. Lloyds will itself inject a new entrant into the market in early September when it spins out TSB – demanded by the EU in return for £20bn of taxpayer money pumped into Lloyds in 2008 – after a sale of the business to the Co-operative Bank fell through. RBS is also carving out a branch network at the behest of Brussels because of its £45bn taxpayer bailout.

Others such as Tesco Bank are not joining the switching service at this stage, but are expected to join a second wave of participants. A spokesperson for Tesco Bank said: "We plan to join the second wave of testing for this service in November 2013, which is expected to support a launch of the product in 2014." Norwich & Peterborough, which is the only one of the second-tier building societies to offer current accounts, has also said it is not taking part in the September launch, but hopes to join the scheme in the future.

However, Sir Richard Branson's Virgin Money is also taking part in the switching service, even though it does not have current account products in its range. Tesco expects to launch a current account next year, but Virgin could have one on the market before year-end.

To encourage customers to shift, the banks may need different products. The big four largely offer free in-credit banking and would face a public backlash if they started to charge for transactions. First Direct, an arm of HSBC, is offering cash rewards to new customers. Nationwide building society is also aiming to win new business through a big push of its existing products. Others may charge for their service. When Marks & Spencer launched into banking, every current account was an "added value" packaged account – offering add-on services – charging £15 to £20 a month. The payments council has told the government it will judge its success on the level of awareness and consumer confidence in switching. But it refuses to set a target. In 2009, around 600,000 accounts were switched, and the total doubled to 1.2m last year.

Article Source : http://www.guardian.co.uk

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Britain is booming? FTSE reaches 12-year high as record looms

Index rises to levels last seen before dotcom bubble burst, fuelled by a relatively calm eurozone, QE, low interest rates and rising confidence in Japan

At a close of 6,755 points, the FTSE 100 blue chip index matched levels from September 2000, just before the market's fascination with loss-making technology companies such as last minute.com came to an abrupt end and the dotcom bubble burst. The closely watched index of the 100 biggest companies traded in London is also within sight of its all time peak of the 6,930 reached on 30 December 1999.

The FTSE 100 is nonetheless lagging behind many other global markets, including the S&P 500 in the US and the Dax in Germany, which are at record levels.

Investors are betting that central bankers, including the Bank of England and US Federal Reserve, will continue their attempts to boost the global economy by printing money and keeping interest rates at historic lows. The buoyant stock market may take some of the pressure off George Osborne as he tries to persuade voters that his emphasis on public spending cuts to re-establish confidence in the economy is working. Bailed-out RBS was also the biggest gainer on Monday, rising 4.5%.

The FTSE has risen to a 12-year high. Photograph: Martin Argles for the Guardian

Earlier this month, the chancellor narrowly avoided the humiliation of a triple dip recession and since then has enjoyed the first signs that economic activity is picking up, mainly in the services sector and the south-east.

Even so, the FTSE 100 – which only four years ago sank to below 4,000 – is linked to the the global economy, which accounts for around 70% of sales by FTSE 100 firms.

Investors were encouraged by the Japanese government's optimism, amid signs that Tokyo has inspired the first sustained period of solid expansion in two decades. Signs of growth, albeit tentative, have encouraged a more positive mood among investors, while the long-running euro zone crisis seems to have entered a period of reasonable calm. A number of major deals, the latest being Yahoo's $1.1bn (£750m) proposed purchase of blogging site Tumblr, have also helped sustain the rally.

The historically low level of interest rates has also made shares more attractive than other investments. Gold and silver, previously considered safe haven investments, have lost their lustre.

Since the global banking crisis sent markets tumbling, with the FTSE 100 falling to 3,529 in March 2009, shares have slowly been regaining lost ground, gathering momentum in recent weeks. The turning point came last summer when the head of the European Central Bank said he would do "whatever it takes" to save the euro from collapse. Mario Draghi's message was taken by investors as a vote of confidence in the 17-member currency club and a signal that a repeat of the Greek crisis would be dealt with swiftly by Brussels.

Richard Hunter at the UK's largest financial adviser, Hargreaves Lans down, said shares in Britain's 100 biggest companies were likely to continue rising this year as long as companies could sustain their current run of profits.

"It doesn't look like central banks are going to stop printing money any time soon. Interest rates are going to remain low. When there is little money to be made investing in government bonds and commodities are volatile, stock markets have become the focus of most investors' attention," he said.

But some City analysts believe the recent positive run could soon come to an end, especially if the central banks turn off the money taps.

Julian Jessop at researchers Capital Economics said: "[We] expect a substantial correction in equity prices in the second half of the year, perhaps of the order of 10% for the US and UK markets and 15% for Europe and Japan, most likely triggered by the scaling back of the Fed's quantitative easing programme and a renewed escalation of the crisis in the euro zone. Assuming global monetary policy remains loose and Europe emerges stronger, the markets should then perk up again in 2014. But we doubt the current euphoria will last throughout 2013."

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Article source : http://www.guardian.co.uk