Banking customers fear that switching their current account to a new bank will be “complicated, time-consuming and risky”, an investigation into the banking market has warned, adding that customers could save up to £260 a year by switching to a different provider.
A review of the industry by the Competitions and Markets Authority found that banks are not being put under enough competitive pressure in the current market and said that banks had been able to “sit back and take their existing customers for granted”.
The study found that 57 per cent of consumers have been with the same current account provider for more than 10 years, and 37 per cent for more than 20 years. Typically, a customer could save £70 a year by switching to an alternative bank, the report said, but heavy overdraft users could save up to £260 a year if they switched.
The CMA said the Current Account Switch Service (CASS), set up to make the process easier, was functioning “reasonably well”, but awareness and confidence remain low.
Only three per cent of customers switched their personal current account (PCA) in 2014 and just 16 per cent looked at alternative accounts.
Consumer groups, however, warned that the review did not go far enough and called for “more radical” ways to promote switching.
Citizens Advice Scotland’s Consumer spokesman Fraser Sutherland said: “The CMA’s findings, that some consumers are wasting over £260 in expensive overdrafts, come as little surprise to those working on the frontline with vulnerable consumers.
“We would like to see real concrete action, not only in helping consumers switch to a bank that suits their needs but also in making overdraft charges fairer and easier to understand.”
Which? executive director, Richard Lloyd, said: “The CMA inquiry has to bring about better banking, but these proposals don’t go far enough. The CMA’s own evidence is that consumers are disengaged from the banking market, so better information and nudges to switch will not be enough.
“The regulator now has six months to find more radical ways to promote switching, improve information for consumers and punish those banks who fail to treat customers fairly.”
Fionn Travers-Smith, campaign manager of Move Your Money, said that Britain’s financial institutions should be broken up into different types of banks.
He said: “Greater transparency in the banking sector is always welcome, but refusing to consider breaking up Britain’s massive mega-banks misses an open goal.”