27 July 2012

Few customers are moving their current account despite new polls suggesting that people favour smaller, more ethical, financial service providers.

Following the recent high-profile technology glitch at RBS which left thousands of customers with difficulty accessing money and paying bills, and the Barclays Libor scandal, alternative sources of finance such as mutuals, credit unions and new banks have seen a sharp increase in enquiries.

Metro Bank said that they had seen an increase of 30% in account openings and inquiries in the week following the scandal breaking, and Tridos, the Dutch bank, reported a 50% increase in demand for its ethical savings accounts week-on-week.

The Co-operative Group, a self-proclaimed “ethical” organisation that is looking to triple the size of its banking arm with the purchase of 600 Lloyds Banking Group branches, said it had benefited from a “definite uplift in customers requesting to switch their current account to us from Barclays”. It claimed the number of customers requesting to move had increased by almost 90% this week compared with last.

However, high street banks are reporting that the number of customers closing their account has remained largely unchanged. Some consumer groups believe that the amount of time it takes to switch accounts, on average 30 days, is putting customers off moving.  Research from the Office of Fair Trading has suggested that a significant number of customers felt it was too complicated and risky to switch accounts. 

“Our research has shown that even when consumers are unhappy with their bank they do not switch,” said Adam Scorer of Consumer Focus, speaking to the Financial Times. “Promoting switching and tackling the lack of transparency over fees and charges would be a way to kick start competition and force providers to put a lot more into customer service than they currently do.”

On Friday the OFT launched an investigation to see if banks had increased transparency about their fees and improved the switching process according to a previous OFT report. New switching rules, set to come into effect at the end of 2013, will cut the maximum time it takes to move to a new current account to seven working days.