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Loyalty and banks: a marriage of convenience?

The results of a survey released by Valassis this week revealed that almost a third of US consumers don’t feel any loyalty to their bank, with 10% of respondents planning to switch their bank within a year. If we compare this to the UK, where consumers are more likely to get divorced than switch bank, the apparent disparity in loyalty across the pond is interesting to note, however, is it all smoke and mirrors? 

According to the Valassis survey, the most important factor for those planning to switch account in the US is to find better rates (45%) – in a country where fees can be particularly high, this is somewhat unsurprising. Major life changes, better promotional offers and more conveniently located branches were the other major factors considered important by respondents when looking to change bank. However, we must take into account that although respondents to a survey may say they don’t feel any loyalty to their bank and are planning to make the switch, it doesn’t necessarily mean that they will actually go through with it. In fact, a survey conducted for Bankrate and MONEY, stated the average US consumer has used the same primary bank account for approximately 16 years, with more than a quarter (26%) for over 20 years.

If we take a look at the UK, while moving banks has never been easier thanks to the Current Account Switching Service, the latest switching rate figures (July 2017 to June 2018) represent just 2% of current account holders – a figure that is certainly much lower than those who say they are planning to switch bank across the pond – and many of those who do make the switch decide to keep their old account open anyway. In fact, up to 20% of UK consumers considered switching banks in 2017, but decided against it.

This is despite just a quarter of UK consumers feeling that their bank treats them as a valued customer and recognises their loyalty, according to a report released this week from Collinson. What is even more interesting is that UK consumers continue to stay loyal to their bank following high profile IT outages – for example, three in four consumers affected by a TSB outage in April last year said they wouldn’t leave.

Therefore, the question is, why are consumers reluctant to make the switch? Is it simply because the golden hellos aren’t incentive enough to get consumers to move? Is it a matter of convenience, and not wanting to go through ‘the hassle’ of switching banks, despite it being easier than ever? Or could they be generally satisfied with their current bank?

According to numerous sources, one of the main reasons for staying married to your bank is that there is little difference perceived between banks. While this is changing slowly with digitally-focussed disruptors such as Revolut and Monzo, consumers do not see any reason to switch. Perhaps to the everyday consumer, there doesn’t seem to be any key differentiating or genuinely innovative and personalised incentives or loyalty programs among the key market players. Another reason cited is the fear of something going wrong during the switch, costing them money or affecting credit rating or being unable to access their funds.

Whatever the underlying reason is, it is clear that while consumers on both sides of the pond may consider or even plan to switch banks, it does not necessarily mean they will take the plunge and make the change. It will be interesting to see how thing play out in the coming years.

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