Customers don’t need bank account number portability
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The Reserve Bank of India (RBI) recently proposed that it is time for banks to facilitate account number portability just like mobile network providers. Read about it here: bit.ly/2rntviD. The intent of RBI is to support the “prospect of an aggrieved customer silently moving her account to another bank”. However, the customer value of the idea is questionable.
The chief customer-centric issues on this proposal are:
1)What pain does account number portability solve?
2)Is there a barrier to exit? Does it improve choice?
3)Will it deliver improved services through competitive impact?
A mobile number is a primary public contact identifier for individuals. Before mobile number portability (MNP), changing one’s mobile operator necessitated a number change. Postpaid higher income customers with large contact lists were likelier to be ‘hostages’ enduring poor service over the pain of switching. Prepaid customers rarely cared and switched every time they got better tariffs. Before MNP, it was possible for a customer to switch providers—with a minor inconvenience and no financial cost. Only around 0.5% of mobile subscribers request number porting each month. This is lower than churn. It is hard to conclude therefore that MNP caused a significant improvement in customer choice.
The technical basis for MNP was pre-existing. Mobile numbers globally are 10 digits, pre-fixed by country code. India, owing to a peculiar historical licensing regime, created an artificial geographical tether. Number series were alloted by DoT based on circle/operator. Travelling from Mumbai to Thane took you to a different circle, inviting expensive roaming charges—even without changing your provider. Still, MNP brought two real benefits to customers—convenience and savings (on roaming charges). As Jio has shown these benefits are past their sell-by date as we enter the post-roaming, data era.
Also, the MNP process isn’t without effort or delay. It could be argued that in the social media age, it is easier to announce your ‘break-up’ with your operator and post your new ‘relationship’ status with the new number on Facebook or Twitter than go through porting trouble. Fine excuse to spring-clean one’s contact list too!
So, MNP removes the inconvenience for a customer having to inform her contacts of the change, marginally improves the existing choice of changing one’s provider at a small fee (Rs19), without conclusive evidence of significantly improving competitive value.
A bank account number, in contrast, is confidential information to be disclosed purely on a need-to-know basis—one reason why there is no single global standard for bank account numbering. It ranges from 11 to 16 digits, even including alphabets in some countries. Banked customers choose providers based on financial needs. For instance, salary accounts are usually employer mandated, transactional accounts chosen on branch proximity, fixed deposits providers picked for better interest rates, current accounts for business and perhaps specialist banks for investments. Multiplicity of banking providers should be encouraged. Diversification of financial portfolio and risk is money management 101. Jan Dhan account holders could, for example, have one ‘direct cash benefit’ account; a transactional account with a payments bank that has a close-by banking outlet and fixed deposits with a small finance bank that offers attractive interest rates.
Furthermore, Unified Payments Interface makes it trivially simple to change the source/destination account for transactions. In fact mobilenumber@upi or aadhaarnumber@upi or paymehere@upi are all variants of simple unique financial addresses that can be attached to any account. Besides RTGS, NEFT, and cheques make it extremely easy for a customer to ‘silently’ move funds to a new bank before dumping the old one. Similarly, online banking and electronic clearance system mandates provide a simple, zero-cost alternative to re-routing all recurring outgoing payments to a different source account.
Lastly, the unprecedented heave of competition that 21 differentiated banking licenses represents can scarcely be matched by account number portability. It is a regulatory ask, at best, for a marginal utility feature. In contrast, the potential cost and pain to the banking system for technology and process compliance could be enormous—and will eventually hit the customer. The only outright winners from implementing this would be information technology majors with banks as captive clients. Hence, bank account number portability doesn’t solve an expressed or implicit inconvenience, clears no known barriers to exit or improve choice, while inviting indeterminate upheaval expense. The RBI may instead achieve this intent by ensuring banks issue clearer guidelines with stipulated turnaround times for servicing account opening/closure requests, limit or bar penalties for closing accounts except those previously contracted, accompanied by fines for breaching guidelines.
Anand Raman is an independent consultant focused on digital financial inclusion and payments.