The Federal Government says its “tick and flick” plan will make it easier for customers to switch banks, but the proposal has received a lukewarm response from business groups.
In a bid to make banking more competitive, the government says it will introduce a tick-and-flick plan from next July as a cheaper alternative to portable bank accounts.
Under the plan, customers sign a single form to authorise their new bank to transfer all direct debts and credits linked to their accounts.
The plan is a key recommendation in a report by former Reserve Bank governor Bernie Fraser, who investigated the issue of bank account transferability.
According to Treasurer Wayne Swan, the tick-and-flick system will simply the process of switching banks at no cost to consumers, with the banks expected to absorb any extra costs.
“[Consumers] will be free of the burden and the headache of running around and trying to collect all their debits and credits and so on,” Swan said.
“They’ll be able to go to their new financial institution and simply sign one form and that financial institution will go and do all of the heavy lifting.”
Stephen Münchenberg, chief executive of the Australian Bankers’ Association, has expressed his support for the plan, insisting all the usual safeguards will be in place.
“Customers will still need to go through things like the 100-point identity check. There are government requirements we have in place to avoid people misusing the banking system” he said in a statement.
“We will need to build new processes behind the scenes to make this happen, [and] to make sure it happens without any mistakes.”
Christopher Zinn from consumer group Choice says the plan puts consumers in a good position because being able to switch providers is “one of the best single things you can do to get yourself a better deal”.
But not everyone is happy with the plan, with small business lobbyist Peter Strong claiming the needs of small businesses have been ignored, namely in relation to portable bank accounts.
“[The Council of Small Business of Australia] was responsible for getting the issue of portable bank accounts onto the agenda,” Strong said in a statement.
“We should be able to change our banks easily when we need better efficiency in the payment system or better returns from investments.”
“Once we raised the issue, we were supported by Choice Magazine and many other consumer groups. But in the end, small business people have been left out in the cold.”
Competition expert Frank Zumbo – an associate professor at the University of New South Wales, believes the announcement is long overdue but has also expressed concern.
“There are real doubts as to whether the reforms are to be extended to small business customers, given that [Wayne] Swan… appears to be referring only to consumers having the benefit of the new streamlined switching process,” Zumbo says.
Meanwhile, shadow treasurer Joe Hockey says the plan will increase the regulatory burden on banks, and costs could be passed onto customers through higher fees and interest rates.