Switching current accounts

Andrew Hagger of Moneynet comments on the report issued today by the Independent Banking Commission.

There is currently no shortage of competition in the current account market with some banks even offering financial handouts to switch, and that's the way it's been for a few years now.

The process may be perceived as being a little cumbersome, but is this really the reason that people don't move their current account on a frequent basis or is it more down to media scare stories or perhaps that they don't see their current account as something they wish to move from provider to provider at a drop of a hat?

Switching your energy, telephone or broadband provider may have become the norm to save a few pounds but switching current accounts in the same way or frequency just isn't going to happen.

In a survey of Moneynet readers last month, 34% of consumers said they wouldn't switch their current account because they thought all banks were the same, whilst a further 29% said they didn't trust the transfer process to run smoothly. Therefore you really have to question whether a faster switching process or being able to keep the same account number will change consumers' attitude to changing banks.

Most banks have dedicated switching teams in place and will guarantee that you will not incur any charges due to the transfer process, however the thought of moving your direct debits and standing orders, a new debit card and PIN and new internet banking to get used to are more likely to be the barrier rather than a lack of competition and choice in the market.

Section 5.18 of today's report suggests that customers losing interest on credit balances may be a deterrent to switching, however even if you had the best deal on the market at the moment (5% on first £2.5k with Santander) and the switch took 10 days you'd only be losing £2.73 after tax.

I'm not sure what the Treasury Committee would expect a new entrant to the banking arena to do differently; they too will still be strangled by consumer credit regulation which automatically doubles the word count of any customer literature.

It's easier to be different when you're a new player with a handful of branches and a few thousand customers, but when you build a larger more complex customer base over a number of years, the initial gimmicks that set you apart from the ‘big boring banks' will be cast aside in search of a better profit margin and a need to satisfy the city in fear that your share price will suffer.

If there's no competition out there at the moment, I'd like to know what you call it, providers have been falling over themselves in the last 12-18 months offering loyalty incentives to their current account customers, realising at long last that looking after existing customers is equally as important as recruiting new ones.