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first direct Current Account Reforms Countdown Tracker

06 Feb 2012

Britons switched off to current account change 

Nearly nine in ten Brits (87%) are unaware or confused about the changes being brought in to improve current account services and make it easier for them to switch¹, according to first direct . The online bank has launched the 'Current Account Reforms Countdown Tracker' to regularly track consumer awareness of the current account changes due to be implemented by Q3 2013.² 

The confusion surrounding the planned improvements to current account and switching services could perpetuate the reluctance to switch providers and prevent people from making the most of their finances, with nearly half of people (43%) saying they have never switched. 

The survey of almost 2,500 UK adults found that under a quarter (23%) of those who expressed some knowledge of the current account reforms were able to correctly identify the proposed changes. 

Only three in ten people know that banks will be required to introduce a redirection service for standing orders and direct debits to ensure payments continue to be made when a customer switches provider. Twenty nine per cent are aware that a seven-day time limit for switching a customer's account is to be introduced. 

Figure 1. People's awareness of the current account changes 

Change

% of people who know this IS NOT one of the planned changes

% of people who know this IS one of the planned changes

Banks will offer customers a free consultation service

 

10%

Portable current account numbers will be introduced

 

15%

Banks will be banned from charging monthly account fees

 

22%

Banks will have to pay compensation to inconvenienced customers

25%

 

There will be a 7-day time limit for switching a current account

29%

 

Banks will introduce a redirection service for standing orders & direct debits

30%

 

Banks will provide an annual summary to customers

30%

 

Consumers' shaky knowledge of how they will benefit from the changes is concerning, given that Britons have a poor track record of switching even when it may be in their best interest. Forty three per cent of those surveyed have never switched current account provider and only 4% say they definitely will switch in the next two years. Despite this, nearly a quarter of people (23%) rate their satisfaction with their account at five out of ten or lower. 

In terms of motivations for deciding to switch, the top reason given is one that will be introduced under the plans for improving current account service; 44% of people would be more likely to switch if banks could guarantee that all standing orders and direct debits will be switched without any hassle or delay. The second and third most popular reasons were complaints about people's existing account. 

Top five factors most likely to cause customers to switch

44%  - A guarantee that all standing orders and direct debits will be switched without hassle or delay

29%  - Charges being introduced by my current provider

27%  - Poor customer service from my existing provider

27%  - To receive a better interest rate

20%  - Having a guarantee that my bank account will switch in a short timeframe                                                                

Thinking about the aspects of their main current account that are most important to them at the moment, 88% of those questioned said not being charged a monthly administration fee and 70% said the interest rate charged if the approved overdraft is used. Only half (51%) thought the benefits they received as part of the account were important, suggesting that people are largely focused on having the right service for managing their money. 

Mark Mullen, CEO of first direct , comments: "As a nation, we have never been keen to switch current accounts, even when we are not fully satisfied with the service we are receiving, due to the time and effort we expect the process to take. However, the improvements to current account and switching services are set to help change this attitude, giving consumers the confidence to switch when this is the best option for them, and make managing finances easier and more transparent. It is important that people are made aware of the changes to enable them to take advantage of the benefits." 

Younger generation more open to change

The older people are, the more likely they are to know about the changes planned to current account services, but the more likely they are to say they definitely won't switch. Thirty nine per cent of over 55 year olds will not switch in the next two years compared to 16% of 16-24 year olds. 

The 16-24 year old age group is the most likely to consider switching (32%). They were most likely to switch for better interest rates (40% vs. 27% for older age groups), if a short timeframe were guaranteed (29%) and appreciated the offer of switching advice (18%). 

The over 55s chose to open their first current account with a bank with a local branch (39%) or good reputation (25%) and were most likely to be tempted to switch as a result of issues with their current bank such as charges being introduced, poor customer service, or a local branch closing.

 

-Ends-

 

Notes to Editors  

1 Research carried out on behalf of first direct by Opinion Matters between 23.12.11 and 09.01.12 among a sample size of 2492 UK adults. 

² In its Final Report, 12.09.11, the Independent Commission on Banking recommended that a current account redirection service should be established, to smooth the process of switching current accounts for individuals and small businesses. To be effective, it should:

  • catch all credits and debits going to the old (closed) account, including automated payments taken from debit cards as well as direct debits;
  • be seamless for the customer, so that throughout the process they have complete, problem-free use of their banking services and are not inconvenienced by debits or credits going to the wrong account;
  • last for at least 13 months, to catch annual payments;
  • continue to send reminders and provide support to direct debit originators to ensure that they update their details for people who have switched accounts;
  • guarantee that customers will not suffer loss if mistakes occur in the switching process; and
  • be free to the customer.

The industry is working to collectively implement these measures by Q3 2013 

For further information contact Amanda Brown on 0113 276 6700, amanda.brown@firstdirect.com or Louise Weaver / Hugh Murphy at The Wriglesworth Consultancy on 020 7427 1400, l.weaver@wriglesworth.com / h.murphy@wriglesworth.com

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