Current account holders switched-off from switching

Three-quarters of consumers have never even considered switching their current account to another bank, according to new research by Consumer Focus.

A further 17 per cent (equating to more than eight million people) 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.

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.

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.
 
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 worthiness 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.