ACCOUNT NUMBER PORTABILITY: THE SOLUTION OF THE ENTRY BARRIERS OF FINTECH
Account number portability will contribute to the stability and competitiveness of banks, reducing the entry barriers for FINTECH. Many studies have been done about this matter from most important institutions in banking and consumer area.
An important axiom: competition leads to better products or services at lower prices.
The competitiveness between banks could improve the offers and services. This important axiom is underlined by the Authority for Consumer and Marketers that has declared:
"...Consumers and businesses are able to promote competition in the retail banking sector if they are able to actively compare the products and/or services available on the market, and if they are able to switch banks easily. Switching barriers stand in the way of active consumer behaviour. This could result in higher prices, reduced efficiency, and less innovation in the European retail banking sector..."
THE PROBLEM OF MARKET BARRIERS
This problem of market barrier and the consequent loss of interest by others consumers, has been recognized by the European Commission, that has said:
"... The European Commission (EC) recognizes this competition problem, and seeks to lower the switching barriers in personal payment accounts (also called current accounts) in all EU Member States by introducing the Payment Accounts Directive (PAD)...."
“The results of the study published today explain why consumers change their banks so rarely. If consumers are not able to easily switch bank accounts, they cannot take advantage of better and cheaper banking services on offer elsewhere. The single market is thus deprived of the competitive drive that leads to innovation, cost savings and better quality banking services. This, in the long-run, can prove to be an obstacle to growth.” (2012)
- Several important steps have been taken in Europe in order to foster competition on the banking market with initiatives such as the "Payment Service Directive" (PSD2) and the "Payment Account Directive" (PAD)
- PAD demands for easier ways to switch between banks and asks to member States, as a minimum instrument to support consumers, to implement a manual switching service
- A deeper CBA of ANP is planned for 2019 in order to support the preparation of PAD 2
(*) SOURCES ARE:
The European Commission press release “Consumers: Switching bank accounts – 8 out of 10 mystery shoppers faced difficulties”, 24 Feb 2012 on the results of the Commission monitoring report three years after the entry into force of the Common Principles for Bank Account Switching agreed y the European Banking Industry Committee (EBIC) in 2008
Answer given by Lord Hill on behalf of the Commission to the EP in 2016: http://www.europarl.europa.eu/sides/getAllAnswers.do?reference
"One of the main reasons for consumers’ painful switching experiences and their unwillingness to switch is the fear of losing some incoming and outgoing payments to the ‘new’ account. This issue obviously goes beyond the consumer-bank relationship and involves creditors (e.g. utility companies, lenders) and debtors (e.g. employers, fiscal authorities) who often fail to update new account credentials in their databases in a timely manner. Ultimately, recurring payments continue to come out of the old account which may be insufficiently provisioned or the old account may have been closed.
Account number portability (ANP) would avoid significant inconvenience to consumers and would reassure them that no payment will be lost while switching accounts."
HOW IBANP WAS BORN
FORFIRM has been involved directly as IT consultant for an important German Bank in an operative tentative to centralize in its Frankfurt branch foreign bank accounts. At the end, the operation was limited at the retail segment as the risk of losing clients was too high in the corporate segment. This experience brought us to the conclusion that an innovation in the field was required.