Less consumers switching banks in spite of increased competition
Published: 06 February 2012
The number of customers switching their bank accounts over the last year has fallen dramatically in spite of government efforts to increase competition between banks.
Accenture, the consultancy, reports that 11% of consumers in the UK and Ireland moved one or more accounts to a new bank in 2011, compared to 16% in 2010. Only 6% of consumers switched their current account. Of these, a quarter found the process slow and complicated.
This is disappointing news for the government, who have been pushing for more competition in the retail banking market, hoping to give consumers a better deal. The banking industry aims to improve the switching process by introducing a service that allows current accounts to be transferred in seven days, which could be launched by late 2013.
Critics claim, however, that such a switching service will have little effect because many customers have no desire to move banks. Accenture’s findings revealed that 90% of people who did not switch their current account last year had ‘no desire to change providers’.
This might partly be because banks haven’t yet won back consumers after the financial crisis. A survey by Forrester, the market research firm, shows that three quarters of British customers believe that banks put their profits before their customers. The survey revealed that UK banks had some of the worst relationships with their customers in Europe.
There is also a disparity between what banks charge for services and what customers are willing to pay, according to consultants at Oliver Wyman. Many of these costs are hidden, giving consumers little reason to switch accounts when the benefits of doing so are unclear.
Consumers would greatly benefit from the banking industry becoming more transparent, finding it easier to compare prices between services, leading to better value and greater competition. George Osborne might have welcomed the new bank Virgin Money, however more choice will not lead to greater competition unless consumers can understand the benefits of switching.
Categories: Savings & Banking