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Consumer trust in banks remains at rock bottom. Yet historically very few people switch between banks, even when the service they receive is poor. The launch of the seven-day switching guarantee in September last year has now made it easier for people to vote with their feet, though Which? has found there are still some teething problems that need to be ironed out.
With a quarter of people saying they think there is a current account on the market that better suits their needs than the one they’re using, the question is: where should you go if you are planning to switch?
Bad customer service is the top reason people leave their bank, so customer satisfaction is one of the most important factors to consider, and there are real differences. When we analysed survey responses from more than 5,500 members of the general public who had told us how satisfied they were with their current account, savings account, credit card or mortgage, First Direct came top with an overall score of 75 per cent. At the bottom of the table Bank of Scotland received a score of just 47 per cent.
And although branch accessibility is cited as the main reason for people choosing a current account provider, Smile.co.uk came second in our analysis of brand satisfaction, which means the top two financial brands are internet and telephone only.
Mutuals did well with all five we looked at scoring above the overall average of 58 per cent, whereas high street giants Barclays, Halifax/Bank of Scotland, Natwest/ RBS and Santander all scored below that. Lloyds and HSBC just managed to scrape the average.
If consumers are not happy switching to any of the existing banks or building societies, choice is set to increase this year with new providers, such as the Post Office and Tesco Bank, entering the fray. However, it remains to be seen whether they will really provide a credible alternative to the big six on both pricing and service.
There is also more than just customer service to consider when switching bank accounts, including the quality of the product and how suitable it is for you. In recent months banks have been wooing potential customers with tempting cash offers and cashback debit cards. However, while appealing, consumers should be wary not to let these offers become the sole basis of their decision to switch. Switching to the wrong account could cost far more in the long run than any of these offers, and consumers aren’t always being provided with the information they need to compare accounts fully.
When we compared current accounts for overdraft charges, interest foregone if you’re in credit, and using your debit card overseas we saw a big difference in cost. In our worst case scenario going overdrawn without permission and having payments rejected could cost an extra £183 in fees and charges a month with the most expensive account compared to the least expensive. Over a year this could add up to a massive £2,197 if you do this every month.
Consumers could avoid such high fees if they switched to an account that is better suited to their financial situation. But the information that banks make available to customers at present doesn’t allow people to compare accounts based on their needs. The banks have made overdraft charges in particular almost impossible to compare unless you have extremely detailed transaction data.
We want the government to force banks to release the data they have about how customers use their accounts in an anonymised and consistent format across the industry. This can then be used to develop comparison tools that would allow consumers to rank providers by cost, based on their own personal needs and situation.
Until consumers can easily compare the true cost of different accounts we will not see any real increase in competition in banking, especially as our research has found that the switching guarantee has got off to a rocky start. In our survey, two-thirds had had problems with their switch and a quarter said it took eight working days or more.
According to the Payments Council, there were 306,240 switches in the last quarter of 2013. That’s an increase on the same period in 2012 but still a relatively small figure considering there are millions of current accounts in the UK. It’s no wonder that so few people switch between banks when you can’t easily compare prices.
To boost competition the government must force banks to release this data so people can work out charges and rank providers by cost. With the new switching guarantee experiencing teething problems, this is one catalyst that we believe would help shake up retail banking.
