Bernie Fraser has rejected a proposal for full account number portability in the Australian banking market as being too costly and complicated, and has instead recommended an account-switching authorisation system using a low-cost electronic "mailbox".The proposed mailbox system is modelled on arrangements in place in the United Kingdom, the Netherlands and elsewhere, and makes use of technology developed by the Australian Payments Clearing Association several years ago.Customers would sign just one document indicating the switch to their chosen new financial institution and authorising that institution to execute the related processing work on their behalf. The new institution would have the authority to deal with the current provider.The proposal to explore options to assist customers to switch banking service providers more easily was included in the Government's December 2010 banking policy package, "A Competitive and Sustainable Banking System". The Government asked former Reserve Bank governor, Bernie Fraser, to review the issue.Fraser's report, "Banking Services: Cost-effective Switching Arrangements", was released by the Treasurer yesterday. The Government has endorsed the recommendations of the report and will put together a working party with a view to having a new switching service in place by July next year.Fraser set out to answer three questions. Are current obstacles to switching a major barrier to customers pursuing their desired banking relationships? Would easier switching arrangements contribute to increased competition among financial institutions and deliver worthwhile benefits to customers? And, can easier switching arrangements be implemented at a modest cost to industry and with zero or negligible flow-on charges to customers?After consultation, he came to the view that: "Large numbers of customers currently switch providers when the potential financial gains are sufficiently attractive to justify the effort involved. Customers who are sufficiently motivated to switch find it reasonably easy to do so."He found that switching appears to have been increasing over recent years. "In the more subdued post-GFC credit environment, competition remains keen and considerable switching is occurring."He found that barriers to account-switching are most pronounced in the case of transaction accounts, where additional identity checks are required, and for many customers there are a number of direct debits and credits to be transferred. But, even with transaction accounts "the perceived hassles involved in these processes by prospective switchers are usually greater than the problems experienced by people actually making switches." Eight to 10 per cent of transactions accounts are transferred each year. Fraser said: "These numbers raise the question of the seriousness of current impediments to switching transaction accounts."Clearly, those impediments should not be exaggerated. At the same time, to argue that every customer who wishes to switch transaction accounts can do so without difficulty would also be an exaggeration. For some customers, switching does raise problems, which might be alleviated if simpler and more effective formal switching arrangements were available."In light of these findings, Fraser's preference is for "simple and cheap" switching arrangements that can help to facilitate the flow-on to more customers of the benefits of competition.Account number portability would involve the replacement of the