Understanding value of existing account is key to increasing switching, Tesco Bank
5 August 2015
The difficulties UK current account customers experience in understanding the value of their account is a critical barrier to increasing switching levels, research published by Tesco Bank and TNS has found.
The research, published today as part of a Tesco Bank/TNS White Paper – ‘Current Account Switching – The Consumer Reality’ identifies five conditions that need to be met before a customer will switch any products or service. It sets out the barriers to switching that exist within the current account market in relation to each of the five conditions, and concludes that while good progress has been made in addressing some of the barriers, there remain significant issues that must be addressed before customers will begin switching their current accounts in larger numbers.
The majority of current account customers (55%), for example, find it impossible to determine the value of their account - one of the earliest conditions that must be met before customers will consider switching. Furthermore, there were stark differences between ‘stickers’ (people who are not considering switching), of whom 62% cannot determine the value of their current account, and switchers, of whom only 24% cannot determine the value of their current account.
Tesco Bank has provided the findings to the UK Competition and Markets Authority to support their review into the current account market, and has called 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.
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.”
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. Only then will customers be able to secure a fair return on their money, and avoid paying excessive overdraft charges.”
During a visit to Tesco Bank’s office in Glasgow on Tuesday, Economic Secretary to the Treasury, Harriet Baldwin MP 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.”
The Tesco Bank / TNS White Paper can be downloaded in full, here
The Five Steps to Switching
The consumer research has identified that the reasons why current account holders switch their current account are surprisingly complex and highly individual. Previous research conducted continuously by TNS over the first fifteen months since the advent of the Current Account Switching Service (CASS) identified that for one in four switchers the trigger was poor service. However, beneath this, there are typically five steps which consumers consciously or sub-consciously take prior to their final decision to switch.
The questions consumers seek to answer are deceptively simple but, in trying to answer them, consumers find themselves facing a number of rational and emotional barriers. This leads to current account switching levels being lower than for other ‘serviced product’ categories.
1. Openness to switching
Would I consider switching my current account?
Current accounts, along with mortgages, have the lowest levels of actual switching in either the last year or the last three years. This reflects a strong underlying level of emotional attachment, a relatively high level of importance in consumers’ financial management and a general lack of re-assurance that switching current accounts is a well-accepted behaviour.
2. Understanding the value of a current account
Can I determine the value of my current account?
Understanding current value is an obvious precursor to deciding whether to switch in any market. Without this, it is hard to be confident that switching is a worthwhile consideration. More than half of the respondents interviewed did not know how to determine the value of their current account and a further 23% were not certain. An indication that this condition is not met for the majority.
3. The benefits of switching
Can I be sure that I will be better off if I switch?
Even if the first two conditions are met, only 14% of consumers believe that there are large differences between current accounts. The differences they perceive are almost entirely financial and for many it is difficult to make meaningful comparisons on the most important elements of overdraft fees and charges and credit interest.
4. Ease of switching
Will it be easy and hassle free?
Even when consumers are satisfied that the first three conditions are met, there is considerable concern that it will be difficult and problematic. Whilst there is awareness of CASS, there was very limited understanding that it meant that the bank would make the switch for them and take responsibility if anything did go wrong
5. Making the right choice
Can I be confident that I have made the right choice?
As for all significant decisions, consumers will look for re-assurance and the qualitative research showed the importance of personal recommendation. An outcome of the current low levels of switching is that there is very limited re-assuring word of mouth communication that the process is working well. This is ironic as TNS’s own research suggests that satisfaction with the process is high at over 80% of switchers.
For more information and media enquiries please contact:
Tesco Bank press office
+44 (0) 131 274 3630
Tesco Bank’s goal is to make banking and insurance easier and better value for people who shop at Tesco. We’ve been around since 1997 and today we help more than 5 million customers manage their money every day. Our 4,000 colleagues serve our customers seven days a week from our three main centres in Edinburgh, Glasgow and Newcastle, and we are also available through online and mobile banking 24/7. Tesco Bank participates in the Chartered Banker Professional Standards Board.
Tesco Bank is a trading name of Tesco Personal Finance plc. Registered in Scotland No. SC173199. Registered Office: 2 South Gyle Crescent, Edinburgh, EH12 9FQ