Ever wanted to change banks but then ditched the idea because it was too hard? When you change banks, you need to change a heap of other things too. Where your salary gets deposited, scheduled transfers, direct debits and loan payment to name a few.

Why couldn’t this be just as easy as porting your mobile number to another carrier? Joshua Gans has explored the “switching cost” of changing banks on his blog before and more recently. After thinking about how bank account numbers work, I landed on what might be a simpler solution. Simpler in theory but the challenge is to get the banks to implement it.

Firstly, let’s try to understand what these account numbers mean …

The issue

Your bank account number is strongly tied to where you account lives. The main component of this is the BSB. Banks use BSBs to uniquely identify another bank all the way down to the branch level. Here’s what the numbers actually mean:

BSB (Bank-State-Branch number)

• First 2 digits represent the bank (e.g. ANZ = 01, NAB = 08)
• The 3rd digit is for the state (Victoria = 3, Queensland = 7)
• The last 3 digits are assigned to the specific branch

Think of it as an address for a bank. If we look at “porting” your bank account number to another bank then the BSB needs to remain with the branch. It’s heavily relied on and ingrained to ensure money transfers from bank to bank and branch to branch. I would imagine this being one of the larger technical barriers to implementing porting for bank accounts.

If you’re interested, this BSB Search site will help you search the various BSBs and Banks in Australia.

Account numbers

The number that comes after this is simpler. It’s a unique number assigned by the bank. The key here is that it is only guaranteed unique within that particular bank. That’s why the BSB is so important. It ensures your account is uniquely identified across the entire system.

A potential solution

Consider that your account number is more like your home address than it is a mobile phone number or your electricity retailer account. Once this clicked for me, I realised that we can borrow a tool used in the postal system already.

Australia Post offers a “redirection” service. In theory, banks should be able to do the same. As a consumer, you should be able to have your bank redirect traffic in/out of your old account. This should work simpler than it does with the postal system too because BSB/AccountNo. are easily specified unlike an address with mispellings of your name and street.

So, there’s a pretty straight forward solution we know works in another industry. Now get to it banks!

This entry was posted on Tuesday, May 12th, 2009 at 6:47 pm. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.