Three-quarters of consumers have never even considered switching their current account to another bank, according to new research by Consumer Focus1. A further 17 per cent (equating to more than eight million people2) said they had thought about switching but had not done so. Fear of costs when things go wrong, the hassle involved and fear of a negative effect on credit rating were cited as key reasons why consumers are reluctant to switch.
Research by the watchdog revealed that current account customers are significantly less willing to ‘vote with their feet’ than consumers in other sectors. Only seven per cent switched current accounts in the last two years, far lower than energy (31 per cent), telecoms (26 per cent) and home insurance (22 per cent).
The majority of consumers say they are satisfied with their bank but, worryingly nearly a third (29 per cent) of those who have thought about switching are not happy with their bank and yet still fail to take action to switch to their account. For many this was because they were put off by the switching process itself. Many consumers also felt there was little difference between banks which suggests they thought switching would bring few, if any, benefits.3
Even if consumers do decide to switch, many experience problems with the switching process. According to the Consumer Focus survey, more than two in five (44 per cent) of consumers who had switched had experienced problems when switching, which includes more than a quarter who had problems with Direct Debit transfers – a significant increase over the last two years.4
Sarah Brooks, Head of Financial Services at Consumer Focus, said:
‘For too many people, switching current accounts simply does not enter their mind, even if their bank has let them down. Until more people are prepared to vote with their feet, there will not be enough pressure on banks to improve their performance. Complaints against banks are persistently at an unacceptably high level. We need to promote switching and make it less error prone if we are to force the banks to raise their game.
‘Banks must be fair and upfront about their charges so consumers can make informed choices about which bank offers the best deal. Until consumers see the value in switching and can do so simply, quickly and with no errors, the industry can’t be considered truly competitive.’
To encourage more consumers to switch, Consumer Focus wants to see measures including:
- Clear, fair and transparent bank charges so consumers can see the real costs of the account and use this to help them decide where to bank. Currently fees, such as unauthorised overdraft charges, are often hidden making it difficult to easily compare accounts.5
- The Government-run Moneymadeclear website providing clear, comparable tables on all aspects of current accounts.
- A review into using ‘length of time with the same bank’ as one of the factors for determining a person’s credit worthiness6 as currently many consumers won’t switch due to fears about the effect on their credit rating.
- Banks to provide goodwill payments, and not just return losses, for errors or delays in switching to make up for any inconvenience experienced by the consumer.
- There are nearly 71 million personal current accounts in the UK. Source: Banking on change: UK current accounts 2010 (Datamonitor). This includes dormant and multiple account holding.
- It is estimated that around 93 per cent of the UK adult population holds a current account.
Notes to editors
- The report, ‘Stick or twist: An analysis of consumer behaviour in the personal current account market’ can be found at the following press only link: http://consumerfocus.org.uk/g/4mf
- Consumer Focus commissioned ICM Research to interview a random sample of 2,024 adults aged 18+ by telephone on 17 and 18 February 2010. Surveys were conducted across the country.
- Figures based on the population estimate of 47,358,000 adults in the UK aged 18+.
- Our research data showed that nearly one in three consumers thought all banks were the same so there was no point searching for a better deal.
- 44 per cent of consumers have had problems in the switching process, markedly up from the 28 per cent in a similar 2008 OFT survey. The number of mistakes in the switching process involving Direct Debits has increased from 19 per cent in 2008 to 27 per cent in 2010.
- Currently fees, such as unauthorised overdraft charges, are often hidden and irregular making it difficult to directly compare accounts. The OFT estimates that current accounts earned banks £152 per account in 2006, totalling £8.3 billion. A third of this came from unauthorised overdraft charges.
- One of the variables in determining credit scores is the length of time a consumer has held a current account with the same bank.
- Consumer Focus is the independent champion for consumers in the UK. Consumer Focus gives a strong voice for consumers on the issues that matter to them and works to secure a fair deal on their behalf. We operate across the whole of the economy, persuading businesses, public services and policy makers to put consumers at the heart of what they do.