Switching – is it happening?

Customer Power: Banking is a Harris Interactive programme of research exploring the relationships UK customers have with their bank.  The first article in this series of four explored the relationship customers want to have with their retail bank. This article, the second in the series, explores switching behaviour, what prompts customers to switch and what they are looking for.

Why don’t more consumers switch?

In our first article we discussed the erosion of trust within financial services generally, but noted that customers still trust their own bank.  We showed that customers are split; half have the relationship they want but others seek a return to the old days of more personalised banking.

The Payments Council’s Current Account Switch Service has achieved some success, with a 22% increase in the number of switches in the 12-month period to the end of September 2014, compared with the same period the previous year.

But there remains a great challenge, with over half of bank customers never reviewing their needs, 60% believing all banks are the same, and almost a fifth agreeing ‘it’s better the devil you know’.


Even those who have shown a predisposition to switch are not always motivated enough to make that final step.  Payments Council research shows 8% considered switching bank account in 2012-13 but ultimately decidedagainst the idea. They simply didn’t get round to it, claimed to be happy where they were, felt it wastoo much hassle orbelieved all banks are the same.


Convincing customers to make the move

Awareness of the switch service is increasing. The proportion of customers saying they are definitely or very likely to switch remains low (6%),but the proportion saying definitely not has significantly decreased, with those saying they are unsure doubling.  It would appear that things are moving in the right direction, with the switch service likely playing a part.


Switching remains low however, with many consumers feeling there is little point in moving as they wouldn’t get anything different.  It’s easy to see why:despite the growth in popularity and availability of the basic bank account and the introduction of the added value or packaged account, there are still just three types of bank accounts for customers to choose from.

Clearly something is needed to stimulate greater competition in the sector, and the arrival of new entrants such as Metro, M&S and Tesco are encouraging.  It will be interesting to see the effect of Virgin launching a current account, and to keep an eye on peer-to-peer lending to see if it can break out from the margins.

We also have digital disruption with the growth of online, mobile platforms/ wallets, and even new currencies.But with many of the main banks launching similar platforms, with similar features at the same time, true differentiation is still a challenge.

Is it time to end free-if-in-credit banking?

For many,a shake-up is only possible with an end to free-if-in-credit banking.  Some argue it has stifled competition and created an environment where customers take banking services for granted.

Ending free-if-in-credit banking could lead to customers beginning to value the services provided by banks, forcing them to review their needs and be awakened to the benefits of switching.  On the other hand, a change of this magnitude is likely to be met with resistance by those wishing to maintain the status quo or who just don’t feel they should have to pay for a bank account.

When asked what they would do if every bank charged, three quarters of consumers at least slightly agree they would pay more attention to the service levels and benefits they receive.  Well over half agree they would be more likely to switch.  If the goal is to get more people to pay more attention to a service that helps people function in their everyday lives, these statistics show that ending free-if-in-credit banking would be a positive move.


Where would consumers switch to and what are they looking for?

Nationwide and Santander are the top two brands for those considering switching– unsurprising given they are also in the top three brands for the Harris Relationship Score.  They are closely followed by Lloyds and then Virgin Money – which is surprising since it doesn’t even have a bank account yet!  Proof again that some consumers are ready to consider something different.

Recent switchers want a provider that understands their needs and tailors the approach accordingly, while potential switchers are after deals and value.  But overall, the key attributes most desired by bank account customers are:

  • Simplicity
  • Value for money
  • Rewarding loyalty
  • Understanding & responding to needs.

Nationwide is the top choice for switchers from other banks, and is rated highly in all of these areas by its current customers.  Santander, the second top choice, is strong on rewarding loyalty and understanding needs but could improve by better demonstrating value and tailoring its service more.

Nationwide and Santander also rate highly for the quality of their mobile banking apps.  Whilethis isn’t important to everyone now, performing well here can reflect a more forward-looking brand, appealing to younger consumers, and may well increase in importance over time.


Levels of bank account switching remain low, despite increased awareness of the switch service.

While many appear happy with their bank, it is more the case that they don’t review their needs and see all banks as the same.  Customers considering switching would be more likely to do so if they could see the tangible benefits.

This may come in the form of the demise of free-if-in-credit banking, as banks are forced to compete harder and consumers pay more attention to the value of the service.

Simplicity, value for money and rewards for loyalty are the key needs of consumers, and these will need to be addressed by providers if switching is to be encouraged.

harrisinteractiveAbout Harris Interactive UK

Harris Interactive UK is a full service, consultative custom market research agency working internationally out of offices in the UK and Europe.  With in-house expertise covering all areas of research design, implementation, analysis and reporting, it has particular strengths in loyalty and brand.

For more information, please visit the Harris Interactive UK website.

Customer Power: Banking is a Harris Interactive programme of research exploring the relationships that UK customers have with their bank. The team comprises Debbie Senior – Senior Consultant, Phil Brooks – Financial Services Research Director, and Georgiana Brown – Financial Services Research Manager.

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