Members of the UK200Group comment on proposals to make bank switch easier for SMEs
Members of the UK200Group of independent accountancy and law firms have commented on news that banks could be forced to make it easier for small business to switch accounts.
According to a report in the Telegraph, the Competition and Markets Authority (CMA) is expected to announce new regulations that would force banks to make it easier for SMEs to switch their current account provider.
Currently, individuals can switch their current accounts to a new bank in seven days, taking their direct debits and inbound payments with them. However, small businesses find it much harder to use the switch service, due to legal constraints and credit issues.
Duncan Montgomery, tax partner at UK200Group member firm Whittingham Riddell, said:
“If easy switching came with the ability to automatically sweep from the old accounts to the new, that would save a lot of stress both on implementation and afterwards.
“Some SMEs have customers who have paid into the same bank account for thirty years, and their business model involves lots of customers who order infrequently, to change is a material risk to cashflow and a severe admin headache.
“Switching banks can be painful and many are reluctant to do so, mainly because of personal relationships, or sometimes because the existing provider leaves the SME alone or even has insufficient security.
“Business generally has other things to do besides change banks, but periodic review is worthwhile and there certainly are high street names keen for business.”
Jonathan Russell, partner at UK200Group member firm ReesRussell, said:
“Could banks make it easier for businesses to move their account? The answer must be yes, in the same way as there are protocols for changing professional advisers, it would seem sensible.
“However, would small businesses then be changing banks in any greater numbers? I doubt it – the most frequent remark made by small businesses, disillusioned with their banks, is that there is no point in changing because they’re all the same, aren’t they?
“Unless the banks make clear distinctions between their offerings it doesn’t matter how easy it is to change, why would they even start to process?”