‘Trapped’ consumers miss out on £10m by not switching banks
A year on from a major investigation into competition in the banking industry has had little impact as consumers miss out on £70 each by not switching to a more suitable current account.
In the 12 months since the Competition and Markets Authority (CMA) published the findings of its three-year-long investigation into retail banking, the number of people switching bank accounts has fallen 14%.
That’s nearly 150,000 fewer people switching. Given that the average person could be £70 off better by switching, that’s a collective £10m in savings that consumers are missing out on, according to TSB.
The bank’s own research found only 28% of people have heard of the Current Account Switch Service (CASS) which guarantees the process will be done in seven days, and 47% have never switched current account. Nearly a quarter (23%) haven’t switched in more than 10 years.
Further, 41% of people believe it’s difficult to make an informed choice when switching, 38% said they can’t see any benefits in switching bank account and 28% said ‘all products are the same’.
TSB said the big banks continue to have a stranglehold on the market, and are taking their customers for granted. The ‘Challenger’ bank also accused its rivals of trapping customers on poor deals and making it difficult to switch.
Paul Pester, CEO at TSB, said: “The CMA had a golden opportunity to fix the industry, by enabling consumers to make informed choices about their banking and ultimately putting them in control. But one year on and its attempt to get consumers a better deal has failed. People are still missing out on the benefits of switching – to the tune of another £10 million in the past 12 months.”
As such, it’s reiterating three recommendations to make the banking sector work:
- Customers need to know what they’re paying for their banking. Banks should tell customers how much they’ve paid each month through a monthly bill. This will lead to greater understanding of products and prompt them to shop around for a better deal.
- The industry needs to create a solution so all customers can switch their bank account, particularly overdraft users who stand to gain the most from switching, saving £260 a year on average – but are least likely to switch. A “credit passport” should be developed which customers can take to their potential new bank.
- Customers need to be made aware of their right to switch banks. All banks should promote the existence of the CASS and explain how switching is easy.
Pester, added: “In a truly competitive market, consumers will be offered genuine choice and a level of transparency they’ve never seen before, so they can make informed choices and switch with ease. Only then will consumers be empowered to vote with their feet and get a better deal.”