Consumers Don’t Really Want Portable Checking Account Numbers

Switching Banks

According to a study conducted by BT and YouGov, 61% of US banking customers want portable banking account numbers. As reported by The Financial Brand:

“The research, which surveyed more than 6,500 people across six countries, found most consumers agreeing that a portable account number — one allowing them to switch banks without changing account details and causing major disruptions — would be useful.”

My take: No way. US consumers don’t want a “portable” banking account number (can’t speak to consumers in other countries, though).

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There’s an old marketing parable (?) that “people don’t want a drill, they want a hole.” This talk of portable banking account numbers is the same thing. 

What people want is less hassle closing accounts. If you tell them a portable banking account number will accomplish that, then, sure, they’ll tell you that they want portable banking account numbers. 

We want portable phone numbers across carriers because we tell so many people our number that switching numbers is a pain. Plus, I have a really cool number (because I’m a Yankees fan in Boston — remind me to tell you that story one day), and there’s no way I’ll give it up. 

But you’ve got to be one really strange nerd to know your checking account number, and be adverse to giving it up. 

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This kind of research scares me. 

Why is BT and YouGov asking US consumers if they want portable bank account numbers?

BT stands for British Telecom, no? Go back to England, BT. We have enough crappy telcos in this country, already, thank you very much. 

YouGov, on the other hand, according to its website, “is a professional research and consulting organization, pioneering the use of technology to collect higher quality, in-depth data for companies, governments, and institutions so that they can better serve the people that sustain them.”

The people sustain the government? Huh?

If this research is aimed at influencing US policy on making it easier for consumers to switch banks by creating portable account numbers, they better be careful what they ask for. 

After all the Dodd-Frank disasters, I wouldn’t expect our government to have any foresight on unanticipated consequences, but government attempts to make it easier for consumers to switch banks by mandating portable account numbers will backfire.  

The cost of deploying this scheme is way beyond my ability. But I will bet that two things will happen:

1) FIs will pass the cost on the consumers, and

2) FIs will deploy other tactics to make it tough to switch — like 2-year contracts like the telcos use. 

In an interesting article on Financial Brand, Mike Branton of Strategy Corps reports on research that shows that consumers express a willingness to pay for what Mike calls “lifestyle financial services” like identity theft alerts and credit score reporting.

Want those services for free? No problem. Just renew your checking account contract for another 2 years, and we’ll throw in ID theft alerts for free. 

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Each year (at least for the past couple of years that I’ve seen research for), no more than 10% of US consumers switch banks. And it’s not for certain that it’s a different 10% each year. 

Why do we need a government policy that adversely impacts the other 90% to serve the 10%? Is that “fair” (which seems to be the mantra of the current administration)? 

It’s not like a policy mandating portable bank account numbers will help the unbanked. They don’t have account numbers. 

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Making it difficult to switch bank accounts is a fundamental element of Porterian (you know, Michael Porter of Harvard) strategy: Create barriers to exit.

Does this it make it inconvenient for the minority of consumers who want to switch? Yes.

But, boo hoo. We have bigger issues in the financial services industry to fix than this.  

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There’s another disconnect in this situation, as well. 

While there’s no doubt that (many) banks make it difficult to switch — out of them, that is — there seems to be no shortage of banks (and credit unions) touting how easy it is to switch to them. Here’s one example from one large regional bank:

This is just one example. There are plenty of other examples I could have included, especially from credit unions.

So, is it easy or not? 

If it is, then we certainly don’t need portable account numbers. And if it’s not, then there are a lot of FIs make false advertising claims.

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8 thoughts on “Consumers Don’t Really Want Portable Checking Account Numbers

  1. Isn’t this just another example of the Government trying to legislate a change that is already being worked out in the marketplace? When a need arises, someone is going to work on finding a solution (in this case there is one out there). You are right though, all they are going to do is find new ways to keep customers around and contracts seem like a very logical evolution.

  2. I hear you, in the sense that people just want their banks to be better, so they don’t even need to consider switching, but the reality behind that 10%/90% argument is that it’s just too much of a hassle to switch. And I wouldn’t say people *just* want less hassle closing accounts – the main thing they want is continuity of automatic debits and credits, so they don’t have to go through the nightmare of individually contacting and filling out paperwork with all those third parties (hence the desire for portable bank account numbers).

    The other point that still wouldn’t be addressed by even portable bank account numbers is an easy way to transfer the online bill payment address book and scheduled payments.

  3. It’s this simple: If a consumer has a portable bank account number, they don’t need to switch all their online bill pays and automatic billing arrangements (biller direct). This does NOT require knowing your account number. All you would do is “move” your relationship from one institution to another, and all your auto-transactions would migrate along with it — like direct deposit.

    It’s also worth pointing out that the move to organize portable account numbers in the UK has been orchestrated by a private intra-industry partnership, not legislated by government. The estimated cost is around $2 billion, I believe.

    The only people who don’t want it are those (switchers) who don’t understand it. As soon as you start thinking about switching banks though …all those bill pay relationships you have set up that need re-entering… all that paperwork you have to fill out… and what if you forget to migrate one of your payments? …you realize that you’re pretty much stuck (which is why FIs call bill pay “sticky”).

    You say “only 10% switch.” But how many more would switch if it wasn’t such a royal pain in the ass (the way FIs seem to like it today)?

    • Also worth mentioning: BT commissioned and funded the study. They are a private telecom company in the UK. YouGov carried the research out, but I can’t explain their connection to the UK government (if one exists). YouGov has done a few studies that The Financial Brand has covered, all for different organizations (like Barclays). Their research has always struck me as rather reliable, on par with what Pew does here in the US.

  4. Mobile # is the only thing that matters in the case of mobile phones and, by letting consumers keep the same #, mobile # portability does help consumers switch MNOs. However, direct debits and credits contain bank details (viz. ABA # / Sort Code) and not just the bank account #. Given this situation, I’ve never understood how bank account portability helps in switching banks at all: After all, even as the account # remains the same when a consumer switches banks, it’s impossible for the new bank to have the same bank / branch details as the old bank, so the consumer would have to make certain manual updations to to their payment instructions even if bank account # portability becomes a reality. Maybe switching banks will no longer be “as painful as root canal surgery” as someone once said, but it’s not going to be as painless as switching MNOs.

  5. @RonS: “I wouldn’t expect our government to have any foresight on unanticipated consequences”. If consequences were foreseen, they wouldn’t be unintended, would they? Or, are you fulfilling @Cathy’s longing for your snarkiness? :)

  6. Ron brings up a great point when mentioning phone numbers. I’ve ported my number twice because most people know that as my phone number.

    But when it comes to porting bank account numbers, I’m very leery. The hack on SC Dept of Revenue is a great example. A lot of account information was obtained in that breach. Just how will portable account numbers be beneficial to a victim of identity theft? Seems it would make it even worse.

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