Last year, an investigation into current accounts was launched to try and address a lack of competition between banks.
The investigation was launched by the Competition and Markets Authority (the CMA), an independent body that works to ensure that markets for products and services are competitive and work in the best interests of customers.
This month, it released its provisional findings and it seems as though people are losing out because they aren’t switching bank accounts and one of the main reasons people don’t switch is that it is hard to compare accounts. The report says those that regularly find themselves falling into their overdraft could save up to £260 per year just by switching their account provider.
The 18-month inquiry by the CMA discovered issues in competition between banks, suggesting that they aren’t working hard enough to keep their existing customers or bring new people in.
In the study, they found that over half (57%) of current account holders have stuck by their provider for over 10 years. Not only that, but a further 37% have remained loyal to their bank for more than 20 years!
According to the research, people who use an overdraft facility are even less likely to switch than other current account customers. Where the average current account holder could save £70 every year by switching accounts, those regularly dipping into their overdraft could save over three times as much.
It’s well known that there are big savings to be made by switching bank accounts, so it’s concerning to see that so few of us are doing so.
Tough to compare
In the research, the CMA said current account customers face a difficult challenge to get to grips with how much their account is costing them.
With complicated overdraft charges, a lack of information on the quality of the services they receive and very little in the way of useful comparison tools, it’s pretty tough for customers to compare current accounts. This is likely to be fuelling a reluctance of customers choosing to switch.
Piling the pressure on
The CMA found that banks were not under enough competitive pressure to offer deals that benefit customers the most, as the low levels of those switching suggests there is nothing tempting enough on offer to justify changing bank accounts.
Brand-new products on the market and new banks cropping up were also suggested to not be offering attractive enough offers, as the level of switching remains low.
Some of the provisional recommendations – which are finalised next May - the CMA suggested that banks should:
- Suggest to customers that they should switch after certain trigger points – like when there are changes to overdraft fees and charges
- Put money towards funding a continued advertising campaign for the Current Account Switching service.
- Make it easier for current account holders to switch.
Disclaimer: All information and links are correct at the time of publishing.