The banking market is on the move – hardly a day goes by without talk of takeovers or increasing competitive pressure due to the emergence of FinTechs. These new players offer innovative, digital financial services and thus fulfil modern customer needs for speed, flexibility and transparency. As a result, traditional banks are being forced to adapt their business models and invest more in digitalisation. At the same time, there are also cooperation approaches between established banks and FinTechs in which both sides can benefit from the respective strengths of the other. One such case is the account switching service.
The principle of a lifelong house bank is history. The willingness to switch banks is significantly higher today than in the past. According to a recent study published on BankBlog in 2023, 55% of German bank customers have changed their main account at least once. There are many reasons for this, including dissatisfaction with the previous bank or its service offering, or the fact that the new account offers better interest rates or lower maintenance fees and costs. According to the study, 63% of bank customers are afraid of a banking and financial crisis. As a result, many spread their money across several accounts in order to be better positioned in the event of a crisis.
However, it is not only the general willingness to switch banks that has increased, but also the frequency of switching. 73% of switchers have already switched banks three or more times, compared to just 27% in 2016.
New legal framework
Since the Payment Accounts Act (in German: Zahlungskontengesetz, ZKG) came into force in 2016, switching accounts has become a little easier for bank customers. All payment service providers that offer consumers payment accounts (e.g. current accounts) are legally obliged to help with switching accounts. The law also sets out a standardised procedure for switching accounts, including precise deadlines for the banks involved. The specific services defined in the ZKG include the transmission of information on existing standing orders and direct debit mandates, the provision of data on incoming credit transfers and direct debits for the last 13 months, the setting up of standing orders on the new account, the transfer of the remaining balance and the closing of the old account at the customer’s request.
But even with the simplifications provided by the ZKG, the process remained extremely time-consuming and cumbersome for customers. In times when digitalisation is permeating more and more areas of our everyday lives, the ‘analogue’ account change is a real anachronism. The complex process of transferring an existing bank account to another institution also harbours financial and security risks.
Nevertheless, the entry into force of the ZKG can be seen as the initial spark for the spread of digital account switching services. With the introduction of PSD2, banks then had to grant third-party providers access to customer data, which gave further impetus to digital account switching thanks to the associated simplification. Technological innovations such as ‘Video-Ident’ procedures for identity verification and the collaboration between banks and FinTechs to facilitate account switching began during this period.
Win-win on both sides
The advantages of a digital account switching service for bank customers are obvious:
- Simplicity and convenience
Customers expect an uncomplicated and user-friendly digital process for switching accounts. They want to be able to switch from the comfort of their own home without having to visit a branch. - Speed
Customers expect the account switch to be processed quickly. In addition, the ZKG stipulates that the entire process should be completed within a maximum of 12 working days. - Comprehensive support
Customers want a service that takes care of all administrative tasks:- Transfer of standing orders and direct debit mandates
- Informing all relevant payment partners about the new bank details
- Transfer of the remaining balance
- Closure of the old account on request
- Immediate usability
After opening an account, more than half of customers expect to be able to use their new account and online banking immediately. This is still a challenge for many banks. - Flexibility in the choice of device
Customers expect to be able to carry out the account switching process using both desktop computers and mobile devices.
However, the digitalisation of the account switching process also has tangible benefits for banks: Actively switching end users to the service as a purely online process on the desktop or in your app reduces costs and effort for customer support and the back office. With Qwist’s account switching service, Account SwitchKit, for example, the process can be reduced from four hours to less than ten minutes.
Banks that want to attract new customers, maintain the satisfaction of their existing customers and also save costs in the back end should consider implementing a digital account switching service and ideally get together with an experienced FinTech. It would be a win-win for everyone involved!
You don’t yet have a digital account switching service for your customers? It’s high time to find out more about the benefits and possibilities of Qwist solutions!
Learn more
