UK consumers stay far too long with their bank

Posted in 'Banking' by Richard Catlin

08 November 2010

The vast majority of consumers are overly-loyal to their current bank, making it even tougher for new entrants to the banking market to attract customers according to a new report.

The Office of Fair Trading (OFT) last week reported that new banks face “significant challenges” in taking customers away from established banks, mainly due to reluctance on the part of consumers and small businesses to switch account providers and also through difficulties in getting licensed by the FSA.

Numerous studies, including our own Banking and Credit Card Survey, regularly report that the majority of consumers aren’t happy with their bank, but also find that very few people actually take the plunge and switch bank.

Consumer Focus, a watchdog that works to get a better deal for consumers, responded to the OFT report by highlighting how the trend for staying loyal to a particular bank reduces the incentive for them to improve their customer service, and damages competition. Despite more than a million people complaining about their bank or building society in 2010, Consumer Focus found that 75% of people had never even considered switching to a new provider.

Our 2010 Banking and Credit Card Survey also found that those who were unhappy with the service they received simply couldn’t be bothered with the hassle of switching banks. Switching credit card providers was a much less feared prospect, on the other hand, and often paves the way to significant savings in lower interest rates.

Our survey revealed a big difference in the level of customer service provided by the best and worst rated credit card providers. Most people could save around £400 in interest charges when switching, and by using their credit rating to find willing lenders, stand a much better chance of being accepted first time around.

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