Widespread confusion about current accounts deters switching
The study by Tesco Bank and TNS found that current accounts are ranked alongside mortgages as the least switched ‘serviced product’ in the past three years.
It put this down to a number of factors but the widespread inability of consumers to determine the value of their current account was the most significant.
The research, published today as part of the Tesco Bank White Paper ‘Current Account Switching – The Consumer Reality’, suggests that 55 per cent of current account customers find it impossible to determine the value of their account, with a further 23 per cent uncertain.
There was a significant discrepancy in the figures between those who are not considering switching, of whom 62 per cent cannot determine the value of their current account, and switchers, of whom only 24 per cent cannot.
However, other factors also play a role. Only 14 per cent of consumers believe that there are significant differences between current accounts, and many find it difficult to make meaningful comparisons on key account features such as overdraft fees, charges and credit interest.
The belief that switching is a difficult process is also widespread. There is awareness of the Current Account Switching Service (CASS) among consumers, but minimal understanding that banks can make the switch for them.
A direct consequence of the current negligible rates of switching is limited word of mouth testimony about the efficiency of the CASS. TNS’ own research suggests that satisfaction with the process is high, at over 80 per cent of switchers.
Tesco Bank has provided the findings of its study to the UK Competition and Markets Authority to support their review into the current account market, and is calling for the industry to make it easier for customers to see the true cost of their accounts and the value of what they receive in return.
Benny Higgins, Tesco Bank chief executive, said: “Customers are telling us that more needs to be done to enable them to understand the true cost and value of their current account. Only then will customers be able to make sure that they are choosing an account that is right for them, secure a fair return on their money, and avoid paying excessive overdraft charges.”
Amy Cashman, head of the finance division at TNS, said: “The lack of understanding of the charges and interest paid on an existing current account means that consumers have no effective basis for comparing and assessing the benefits of switching. Most informed and confident decision making begins with a clear understanding of what you have or where you are today and this condition is clearly not in place for current accounts.”
Commenting, Harriet Baldwin MP, Economic Secretary to the Treasury, said: “The Government is committed to increasing competition in banking to improve outcomes for consumers: more competition means banks have to strive to offer the best possible products and services to their customers. I welcome this research from Tesco Bank which provides a valuable contribution to the debate.”