Last week was a good one for British Banking, for both the industry and its customers. The first sale of shares in one of the part-nationalised banks – at a nominal profit, no less – marked an important first step on the road back to a healthy finance industry. At the same time the advent of the Current Account Switch Service represented a significant shift in the balance of power between retail banks and their customers. Over the next few years, we will see just how significant it is.
I say years, but it may well be longer. Research from the CEBR has predicted only a doubling of account switching frequency over ten years, which seems remarkably low, and is probably more credible, rather than less, for being commissioned by Metro, one of the key challenger banks that stand to benefit from the new service. The much-recited statistic about the average bank account lasting longer than the average marriage is no less odd than it is true, and the CEBR seem to believe that this old habit will die hard.
The truth, however, is that no-one yet knows what the impact will be. On the face of it, the new Current Account Switch Service ought to provide a huge opportunity for the challenger banks, but the established institutions will fight very hard to protect their turf. And, with the advantages of established brand networks, huge marketing budgets and massive reserves of customer data, there’s no doubt that they begin with the upper hand.
Those advantages, however, may not be as robust as they might appear. A ranking of UK banks’ customer service (admittedly assessed alongside the somewhat subjective categories of "honesty" and "integrity") released to coincide with the launch of the Current Account Switch Service, gave a damning verdict on all four of the UK’s biggest retail banks. The same customer satisfaction survey showed a very wide spread of standards as well, with marks ranging from four out of a hundred for one institution, to 89 for another, so this malaise does not affect every company in the industry.
While it may be that the smaller players, the mutuals and the challengers simply have to try harder to counter the incumbent advantages of the big four, the Account Switch Service could mean that their effort translates into growing market share for some of the industry’s smaller players.
In the long term, of course, the Current Account Switch Service will mean that all banks will need to become more customer-centric. That is the inevitable effect of pro-competitive regulation in any industry, and the voice of the customer is likely to have a great deal more influence upon the way that banks will run. The onus will then fall on us, the consumer, to make sure that we communicate clearly with our banks – by taking our custom elsewhere if necessary.
If the Current Account Switch Service works as intended, then dissatisfied customers will simply be able seek better service elsewhere, without any great inconvenience. Poor customer service and other questionable practices may persist, and the institutions that provide them may endure. If they do, however, it will be clear that UK consumers simply have other priorities. Either way, it will show the true colours of what really matters to banking customers in the UK.
For the sake of the economy, and our wellbeing, we can only hope that that is a sensible balance of good value and good service. Those few banks with high customer satisfaction scores do offer something along those lines, and the technology and business know-how needed to do so already exists in most institutions – what will hopefully change is the influence it exerts within them. If the British public do not use their new-found consumer power, then we will have missed a golden opportunity to build a banking industry more in the image of the one we’d all prefer to deal with. After the events of 2008, it was clear that we needed to reform the UK’s retail finance industry. Now that the economy is getting back to its feet, we all have the opportunity help do that.