Full account number portability may address several banking issues, but major challenges remain, according to a leading market research agency.

Under the new banking reform launched by Australian government, one of the key objectives is to conduct a feasibility study for implementing full account number portability. While this is a positive step, Datamonitor believes there are major challenges waiting to be addressed.

The Australian Government has launched a banking reform called "Competitive and Sustainable Banking" which outlined some new initiatives, such as ban on mortgage exit fees and allow account switching as an easier process.

According to the reform, the government will appoint former Reserve Bank of Australia Governor Bernie Fraser to conduct a feasibility study to examine the technological options, the potential timeline and processes for implementing full account number portability.

"Account number portability may address many issues that have been discussed in the past which becomes the barriers for consumers to switch. This means that consumers can take their bank account number to other banks without changing their direct debit arrangement," says Harry Senlitonga, Datamonitor's Senior Analyst.

According to Datamonitor report Australian Consumer Deposits 2010, transaction account is one of the most difficult products to switch. In the last 12 months, Datamonitor survey shows that 5 per cent of consumers have switched their provider.

"While account portability is a great option to consider, there is a reason why this has not been done in the past," Mr Senlitonga said.

"There are two major challenges. The first one is this requires a standardization across the industry. A bank account number consists of BSB (Bank State Branch) number and account number. While BSB is standard across the industry, account number is set by the bank and currently do not follow an industry wide standard. This means extra steps are required in comparison to a similar reform in the telecommunication industry a decade ago, which resulted on mobile phone number portability.

"The second one is this may means extra costs to the industry due to compliance and extra work required. While this eliminates most barriers to switch account, this may means a higher cost of banking."

Datamonitor said it believes account portability remains an option but the government need to carefully consider all important factors and the implications it may caused.

"With a low differentiation on pricing for most of transaction accounts in Australia, the real implications to the consumers will remain to be questioned. For example, the major banks typically charge $5-$6 for an account which offers unlimited transaction, but majority of consumers do not pay this fee due to many ways to get it waived."

"At the meantime, it's important for banks to understand while product pricing is still the number one reason for consumers to switch, but interestingly, good service is the reason why consumers may stay with their current transaction account provider," it said.