Tool compares current accounts
Current account customers will now be able to see in pounds and pence exactly how much better off they could be by moving to another bank or building society, as a Government-backed online comparison tool has been launched.
It is hoped that the tool, which is available on price comparison website Gocompare.com, will transform the current account market by shifting more power into the hands of the consumer.
The huge array of varied and complex charges and benefits that come with current accounts has, until now, been seen as one of the main barriers preventing people from switching to a deal that could make them better off.
The new tool will address this by giving people a personally tailored view, based on their own banking history, of exactly how much cash they could save by switching elsewhere.
Customers of the big five banks - Barclays, HSBC, Lloyds, RBS and Santander - will be able to use the free service initially - along with customers of Britain's biggest building society, Nationwide.
They will be able to compare all basic, packaged and standard accounts currently on the market, not just those being offered by the providers initially taking part in the scheme.
The tool is part of the Government's midata initiative, which was launched in 2011 and aims to give consumers better access and control over the electronic data that companies hold about them.
The initiative enables consumers to have their data uploaded on to comparison websites, to make it easier for them to find the deals that would suit them best, based on their own personal financial habits.
The Government previously announced that GoCompare would be the first comparison website to launch a midata current account comparison tool.
In order to use the service, people will need to log on to their own online banking and click on the midata button to download 12 months of their statements on to a file. To protect personal details, the file will not contain that person's name, address, sort code or full account number and information within certain transactions will be blanked out.
The consumer will need to upload the information on to GoCompare's website. They can also tell the website who they currently bank with, so that they can see how their own provider appears in the rankings.
The tool will make more than 1,500 calculations, taking into account that person's overdraft charges and average in-credit balance, among other factors.
It will then present the consumer with a table, showing people in pounds and pence which accounts could be better suited to them. The comparison can also break down the costs and benefits of that account, such as any interest or charges that person is likely to incur. The customer can then switch if they want to.
GoCompare said the file of bank statements will be purged at the end of the process and the data will not be used for any other reason than to carry out the calculations needed for comparison.
Customers of current account providers that have not signed up to the initiative will not initially be able to use the service in full as their banks have not yet agreed to provide downloadable statements, although more banks are expected to come on board.
Around 65 million active personal accounts exist in the UK and efforts have already been made to make the switching process easier.
Around 1.6 million people have switched current account since the Payments Council launched a scheme in autumn 2013 which cut the length of time it takes to switch from up to 30 working days previously to just seven.
There have already been signs of providers responding to the seven-day switching service by improving what their current accounts have to offer, with many deals boasting cash incentives and in-credit interest in order to retain customers and attract new ones.
The new tool could shake up the market further by making it easier for up-and-coming challenger banks with smaller advertising budgets to get a foothold in the current account market.
Lloyds, Barclays, RBS and HSBC alone represented more than 77% of the current account market in December 2013.
Matt Sanders, GoCompare's banking spokesman, said: "Clearly customers are being swayed by marketing messages, but with access to the tailored comparison we can provide them with, they can also decide what account is best for them once these incentives or introductory offers have passed too."
Welcoming the launch, city minister Andrea Leadsom said: "This innovation will put much more control in the hands of customers and could transform the current account market."
Previous research by consumer group Which? found that six in 10 (59%) people who had switched accounts using the seven-day service were not confident they had picked the deal that best suited them.
Which? executive director, Richard Lloyd, said banks must make people aware of the new current account comparison service and join up to it.
He said: "In the past, it's been almost impossible for people to work out if they have the right bank account.
"The midata initiative will allow people to compare accounts based on their needs and could help them save money if they switch."
Anthony Browne, chief executive of the British Bankers' Association (BBA), described the move as an "exciting innovation".
He said: "Harnessing this data should allow some of us to pay less for our banking and others to earn more interest on their money, as well as highlighting the range of offers, such as cashback, that are available just now.
"However, this is potentially valuable data so it is important to be careful who you share it with and only upload it to websites you trust."