What stops people switching bank accounts? The Abbey habit

The new Current Account Switching Service in the UK has now been live for four months, and has been accompanied by a pretty impressive marketing campaign – TV ads, radio, print, web and even billboards extolling the virtues of the new service.  Individual banks are also advertising hard to win new customers and keep the ones that they already have.  The campaigns are clearly working; according to Payments Council figures, 59% of the public are aware of the service and there were 17% more accounts switched in the last quarter of 2013 compared to the previous year.

These are impressive figures, but why aren’t they higher?  Inertia.  Many of us, myself included, have had the same current account provider for most of their adult lives.  In a busy  life, switching your bank account needs to be easy (which it now is) and there has to be a really compelling reason to move.

A short taxi ride, coincidentally heading to the Payments Council offices, highlighted the challenge. 

“So which part of the evil empire are you visiting, guv?” asked the cabbie.  I get this quite a bit; the Payments Council shares an office building with News International.  Explaining where I was going prompted him to start talking about his banking arrangements, which again happens quite often (for a couple of years it used to prompt a tirade about cheques).

“I’ve been with Lloyds Bank since I was 18, and I thought about switching to Abbey National’s 123” he said.  At a stroke this shows some of the challenges; he had been with his bank forever, and despite Santander spending an heroic amount of money on branding there is still a reasonable slice of the populace that hasn’t noticed that the dear old Abbey is no longer with us.

So why didn’t he switch?

“I’ve got people in Italy I pay every month” he said (I didn’t ask).  “With Lloyds I just do it online – it’s dead easy and only costs me a tenner, although they probably get me on the rates.  If I go to Abbey I’d have to go into a branch to do it”

And that was it.  One particular service offering was enough to tip the balance back in favour of him staying with the bank he has always had.  So the challenge to banks is huge: offer a really compelling commercial incentive and also do everything that the other bank does, and you may just have enough to overcome the inertia that stops people switching.  So there needs to be something else; banks need to offer new services that make them stand out from the rest.

Clearly this isn’t a representative sample of the population or even of London cabbies, but it’s a great illustration.  Things will improve over time; the more people that switch easily and tell their friends, the more likely it is that other people will switch.  But the greatest driver to switching will be when banks start to offer better and more innovative services to get us changing the habits of a lifetime.