16th September 2013
Today marks the start of a new era in current account provision unless of course it doesn’t.
Just about everyone apart from the big banks wants to see more people switch current accounts. Under pressure from policymakers the Payments Council has created the self-explanatory Current Account Switch Service which should bring the obstacles to moving crashing down. Or will it?
It will be easier to move and the banks participating in the scheme will have to offer compensation if something goes wrong. What that means in theory and hopefully in practice is that banks can no longer take their customers for granted. But how many will move. There are almost as many opinions about this as there are bank accounts.
Metro Bank, in work conducted by the Centre for Economic and Business Research suggests that the introduction of CASS will see switchers increase by more than a million people annually from 1.3 million now to 2.5million by 2023.
Those numbers are certainly not insignificant with a switching rate of 5% a year. Apply that to a single bank losing more than the average, and it sounds like enough to get on the board’s agenda and change a bank’s behaviour.
Metro wants more to be done however. The researchers suggest that other measures such as account number portability and standardised comparison tables could crank up the rate to something closer to 10 per cent.
First Direct has suggested that the onus is on marketers to appeal to customers on an emotional level given that its research showed that 44% of people had never switched their current accounts. It suggests that push factors in particular bad service drive customers away and are more important than pulls such as extra account features.
First Direct’s Head of Marketing, Lisa Wood in a post for Econsultancy made the argument that the current account market – and indeed many other markets – may not be price driven.
For example, when it asked ‘what would make you likely to switch from your current account provider?’, 53% said they’d switch because of ‘poor customer service’ while a third said they’d switch because of ‘better interest rates’ and under a quarter said they’d switch because of better account features.
But the obstacles are high. These are mainly worries about the disruption to one’s financial life. Research outfit Consumer Intelligence examining the obstacles, found that 28% said there was little point in switching because most accounts were very similar, 15% were concerned that direct debits wouldn’t be made and 11% said they have an overdraft and were worried that they wouldn’t be offered one elsewhere.
One in 10 were worried that payments would come out of the wrong account, 9% that automated credits would go into the wrong account, and 9% say they don’t have time. Another 5% were worried that changing account would affect their credit rating.
Another research organisation GfK suggests that 78% of the public suggest that CASS is unlikely to tempt them to change banks.
It says the most common reason for people’s choice of bank is branch location with 34% of bank users citing a ‘convenient location near to work or home’ as a factor behind their decision.
But in contrast with other experts, GfK says an increasingly important driver is a financial incentive for opening or using an account. This has been growing in importance over the last few years and was mentioned by 9% of bank users in GfK’s 2010 survey increasing to 13% overall and 16% for online bankers in 2013.
It added that another reason for customers’ reluctance to switch current accounts is that general customer satisfaction levels are high for services provided by their branch. They ranged from 63% who were either “extremely satisfied” or “very satisfied” for enquiries about a new financial product, and the same figure for cash withdrawals or payments at the counter, to the lowest – 55% – for paying in a cheque or cash at a machine.
Bank branches are still an integral part of the banking offer – even for those who bank online or via mobile says GfK.
It says the most popular reason for visiting a bank branch is to draw out cash at an ATM (60% of respondents in the survey said they had done this in the past week; rising to 80% in the last month). One quarter of bank customers (27%) had visited the branch in the last month to make a query about their account. A nearly identical percentage (25%) of customers who bank online had also visited their branch within the last month to make a query. In addition, 9% of bank customers had inquired about a new product in a branch while 6% had completed a financial review in a branch. These figures were again similar for online bankers (9% and 5% respectively).
The top ‘real improvement’ chosen by one third of people (34%) was longer opening hours on Saturdays followed by longer opening hours during the week (31%). One quarter (26%) wanted more qualified staff who can offer help and advice while 24% thought better parking facilities would be a real improvement and 15% said Sunday opening.