Bank hopping is in: lifelong loyalty to one’s home bank is now more of an exception than the rule. When switching from one bank to another, there are now digital moving assistants that significantly ease the transfer of all transactions: so-called account switching services.
What exactly is an account switching service?
An account switching service is a service that helps bank customers when switching their account from one bank to another. It takes care of analyzing standing orders, direct debits, and regular incoming payments, and forwarding the new bank details to relevant payment partners such as employers, insurance companies, or mobile phone providers. Since 2016, banks in the EU have been legally required under the Payment Accounts Directive (PAD) to offer such a service free of charge to simplify the account switching process for consumers. Modern account switching services work digitally and shorten the time required to just a few minutes.
What benefits does an account switching service offer consumers?
An account switching service offers numerous benefits for bank customers. It saves time by automating the time-consuming process of transferring incoming and outgoing payments. By systematically transferring all payments, the risk of errors or forgotten payments is minimized. The service offers high convenience, as the bank takes care of the entire switching process and, upon request, informs contract partners of the new account details. Direct debits, standing orders, and regular incoming payments are automatically transferred. The service is free and can be fully handled digitally. Additionally, the old account is automatically closed upon request. These benefits make the account switching service a practical and efficient solution for customers who want to switch their checking account.
How do banks benefit from a digital account switching service?
For banks, an (ideally digital) account switching service also offers various advantages. It facilitates customer acquisition and retention through a smooth switching process. The modern digital offering improves the bank’s image and optimizes internal processes. As a competitive advantage and to meet legal requirements, the service is important. It opens up cross-selling opportunities and provides valuable customer data. Automation reduces manual efforts and errors.
How does it work and how long does it take?
A digital account switch with an account switching service takes place entirely online and is particularly efficient. The customer initiates the process through their new bank’s online banking or app. There, they enter the details of their old account and digitally grant authorization for the switch. The service automatically analyzes all payment transactions of the old account and presents an overview to the customer. The customer then selects which payments should be transferred and sets the switching date. The service handles the transfer of payments, electronically informs all payment partners, and can close the old account upon request. The customer can track the progress online at any time. This digital process is fast, secure, and requires no paper documents or in-person bank visits.
The entire process therefore only takes a few minutes, rather than the days or weeks it used to take.
What requirements must my bank meet to use a digital account switching solution?
The necessary technical prerequisites include supporting secure data access, such as via APIs, which allow the secure transfer of transactions, direct debits, and standing orders from one institution to another. To ensure the highest level of security during this process, the bank must use strong authentication procedures. Additionally, it must comply with legal requirements, such as data protection regulations and rules for account transfers.
What types of switching services are there?
Currently, the most common services are for bank accounts. As part of Open Finance, future services will go beyond the simple transfer of payment partners and include the transfer of savings accounts, investment portfolios, and other financial products. This offers customers a comprehensive approach to switching banks. Today, there are already providers like Qwist that offer dedicated switching services for investment portfolios.
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