20 September 2014

Chris Dunne

Chris Dunne - VocaLink Limited

21 | posts 64,305 | views 9 | comments

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

What stops people switching bank accounts? The Abbey habit

30 January 2014  |  2966 views  |  1

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.

TagsMobile & onlineRetail banking

Comments: (1)

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 31 January, 2014, 16:59

From personal experience, as long as there's free checking and minimum balances aren't too high, opening another account in another bank that offers a compelling feature comes more naturally than switching an existing account to the other bank. When I was in UK, my primary a/c was at HSBC. Transferring money via HSBC from UK to India would cost GBP 25 and take 3 working days. On the other hand, I could do it free-of-cost and in online / realtime from Citi UK. I simply opened another a/c in Citi UK and used FPS to transfer money from HSBC UK to Citi UK in near realtime and free-of-cost. Coming to think of it, I never even considered switching from HSBC to Citi. Unlike the cabbie, I did check F/X rates at both banks and found them to be in the same ballpark.

Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Latest posts from Chris

Faster Payments takes off for small business

16 September 2014  |  1021 views  |  0  |  Recommends 1 TagsMobile & onlinePayments

Mobile services strengthen customers’ bond with banks

09 July 2014  |  2407 views  |  5  |  Recommends 0 TagsMobile & onlinePaymentsGroupInnovation in Financial Services

Labour’s three objectives for banking reform

09 May 2014  |  1728 views  |  0  |  Recommends 0 TagsPaymentsRetail bankingGroupInnovation in Financial Services

PaySwarm: the most disruptive innovation in payments

19 September 2013  |  4776 views  |  1  |  Recommends 0 TagsPaymentsSibosGroupInnovation in Financial Services
name

Chris Dunne

job title

Payment Services Director

company name

VocaLink Limited

member since

2012

location

London

Summary profile See full profile »
Responsible for the Bacs and Faster Payments scheme businesses and the relationships with the Ban...

Chris's expertise

What Chris reads
VocaLink

Who is commenting on Chris's posts

Dean Wallace
Ketharaman Swaminathan
Vishwanath Thanalapatti