Switching your bank account may not be as easy as you hope
Results of a consumer market study show that more than two thirds of mystery shoppers were not able to switch their bank account successfully. The Commission's 2007 inquiry into the retail banking sector identified significant barriers to customer mobility. These findings were followed by extensive consultation which led the European Commission to urge the Banking Industry Committee (EBIC) to act. EBIC established a self regulatory initiative based on common principles, which was expected to bring clarity for consumers, but today's results show that self regulation in this case is clearly not delivering the desired results.
EU Health and Consumer Commissioner John Dalli said, "I would have liked to see this self regulation initiative working better and banks doing more to make switching easier for European consumers. Consumers need to be able to look for opportunities in the market without undue difficulty or fear of disruption of their payments or receipts. People should be able to change their bank account as easily as they do any other service."
EU Internal Market Commissioner Michel Barnier said "The results of the study published today explain why consumers change their banks so rarely. If consumers are not able to easily switch bank accounts, they cannot take advantage of better and cheaper banking services on offer elsewhere. The single market is thus deprived of the competitive drive that leads to innovation, cost savings and better quality banking services. This, in the long-run, can prove to be an obstacle to growth".
Mystery shopping exercise
In December 2010 the European Commission launched a mystery shopping exercise to monitor the effectiveness of the self regulation initiative, in all 27 EU Member States. Mystery shoppers conducted more than 1000 assessments involving more than 900 enquiries to test the provision of information and more than 400 tests for ease of switching.
The study found that only 19% of mystery shoppers were able to successfully open a bank account with a new bank and switch a standing order based on the process described in the Common Principles established through self-regulation.
81% of mystery shoppers had problems switching and they identified the following weaknesses:
71% of banks would not assist in the transfer (therefore they did not follow the procedures outlined in the Common Principles).
7% of banks approached did not open an account and/or switch a standing order within fourteen working days.
3% of mystery shoppers found that the new bank refused to open a standard account. For example, shoppers were told they would have to receive their pay on the new account if they wanted to open it.
Lack of information: while the study also found that 86% of consumers enquiring about a switch either in a bank branch, online or by telephone, did receive information from at least one information source, the level of information provided was found to vary widely. 14% of consumers received no information at all. The study also mentions a low level of awareness about switching among bank staff.