How To Get A Bank Account To Switch To A Competitor

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1 Financial Services Marketing in 2012 March 2012 Introduction Martin Lewis of Moneysavingexpert.com says that loyalty doesn t pay. However, customer inertia, especially in the area of switching current accounts, has so far meant that, even if customers do not like or feel loyal to their financial services provider they are unlikely to switch to a competitor. But that might be about to change with the perfect storm conditions of Virgin Money taking over Northern Rock (following Metro Bank into the new current account provider sector of the market) and the Independent Commission on Banking s final report recommending that the following measures be introduced by all banks to simplify bank account switching: 1. 7 day transfer 2. Seamless redirection of direct debits and standing orders 3. More information on the overall costs of each account (so that a proper price comparison can be made) Thus, current account customers might finally be given: the guarantee that they can switch account provider painlessly the motivation, as Sir Richard Branson s consumer-friendly Virgin Money proposition finally enters the banking space (following the launch in 2010 of Metro Bank, which was the first new high street bank in more than a century) the tools to do the job thoroughly, as the price comparison sites will be able to use the more detailed information on the costs of different current accounts to provide more accurate assessments of their relative merits for different customers Will the trust that consumers have lost in the financial services industry following the credit crisis finally start to be restored by the new bank brands? And will the customer-centric communication for which Virgin is known elsewhere strike the right note with disillusioned current account holders?

2 Is switching bank in 2012 on everyone s to do list or will consumers be as apathetic about changing current account this year as they always are. In short, is 2012 a tipping point? Opinium s quantitative consumer research sheds light on what might happen. This article by Ian Giles, Opinium Research s Head of Marketing & Insight, examines the UK financial services marketing landscape, based on quantitative research from 2011 and January Opinium s quantitative consumer research Customers views of their banks - including their trustworthiness, honesty, reputation, good service and care for their customers differ widely in the UK According to research conducted by Opinium during 2011, opinion ratings given by customers to their present UK banks range from 91% favourable at best to 53% favourable at worst. At the same time, those customers who have an unfavourable opinion of their present UK bank range from 0% at best to 20% at worst. So, whereas some banks do not have any customers whose opinion of them is unfavourable, at other banks 1 in 5 customers describe their opinion of their bank as unfavourable. Customers were asked to score their banks on a scale of 1 to 5 against a series of measures, including good value, reliable, responsible, honest, known for good service, cares about its customers, innovative, trustworthy, understands my needs, better than other banks and is for someone like me. Again, a significant difference was seen between the highest rated bank, which scored an overall rating of nearly 4.25, and the lowest rated bank, which scored less than This wide range of customer ratings clearly demonstrates that not all banks are seen as the same by their customers and there is definitely scope for improving one s banking service by switching provider. The likelihood of a customer recommending their present bank to friends and family differs significantly between banks Bank customers were also asked by Opinium in 2011 how likely they would be to recommend their present bank if they were advising friends, with 53% of all bank customers indicating they would be likely to recommend their bank and only 13% describing themselves as unlikely to recommend their bank.

3 However, breaking these results down by individual bank shows that there is a big difference between the most and least recommended. 84% of one bank s customers indicated that they would be likely to recommend their bank to friends or family, whereas only 44% of another bank s customers would be likely to do the same thing. More than one in ten bank customers plan to switch provider in the next two years. Introducing the recommendations of the Independent Commission on Banking would make 23% of respondents who have bank accounts more likely to switch their account provider. Opinium conducted research in January 2012 amongst a nationally representative sample of UK adults, asking them about the likelihood of switching their current account and other financial services providers during the next two years. Current account switching behaviour and intentions Just over one in ten (12%) of people are likely to switch their current account provider in the next 2 years: 62% are unlikely 20% of year olds are likely 7% of over 55 s are likely 43% of consumers have switched a current account provider but 56% never have. Of those who have switched an account, 15% said it was difficult while 67% said it was easy (25% said very easy ). 87% said they would switch again if necessary, showing that once a customer has switched once and realised that it is relatively painless, they will be far more likely to switch again. Of those that have never switched, 30% have considered switching but 70% have not.

4 Of those that considered and then did not switch, the most common reasons were: too much hassle to move salary/payments etc (51%) being with a bank for a long time/family always using that bank (31%) didn t have the time to spend switching account (14%) fearful of the paperwork involved (13%) hold other financial products at the present bank (11%) Of those that have never considered switching provider, the most common reasons were: being with the bank a long time/family always using the bank (44%) too much hassle to move salary/payments etc (26%) it never occurred to them (20%) hold other financial products at the present bank (11%) Push and pull factors in switching Given that customers are either too loyal or can t be bothered to switch their bank, Opinium asked consumers to indicate which three scenarios would make them most likely consider leaving their current bank. The most selected Push factors were: Introducing additional bank charges 42% Rude and unhelpful staff 35% Not admitting to any mistakes made 22% Moving to an overseas call centre 19% Increased overdraft charges 18% Local branch to your home closing 16% Paying excessive bank bonuses 16%

5 But what should banks be doing to attract and pull in customers? Opinium asked consumers to tell us exactly what prospective banks should offer to encourage them to switch. The most selected Pull factors were: Good customer service 41% Clear fees and charges 39% A straight forward switching process 38% Friendly and helpful staff 36% UK based call centres 35% Good product rates 32% A local branch to my work or home 26% A brand I can trust 26% Joining offers / gifts 25% Good product benefits 24% Banking reforms Introducing the recommendations of the Independent Commission on Banking would make 23% of respondents who have bank accounts more likely to switch their account provider. This is a significant change in the intentions of customers to switch their current account. New entrants Consumers were asked whether the fact that a bank is now owned by Virgin Money (as Northern Rock is) made them more or less likely to consider opening an account with that bank: 60% said that it would have no real impact 15% said it would make them more likely (19% of year olds) 17% said it would make them less likely (22% of over 55 s) 8% didn t know

6 Other financial services providers When it comes to other service providers, consumers likelihood to switch is as follows: Service % likely to switch in 2012 Motor insurance 36% Building & contents insurance 32% Investments (e.g. ISA) 17% Deposit account 15% Mortgage 8% Pension 5% Customer communication Regarding how banks contact customers, for standard information the most popular methods of communication were as follows. Note that the way the customer likes to be contacted depends on the reason: Face Internet Telephone None of to Letter Text banking call these face platform Monthly account balance 4% 2% 31% 27% 5% 22% 8% Overdraft limit alerts 5% 7% 23% 27% 15% 10% 13% Changes in policy 5% 3% 47% 26% 1% 11% 6% Large debit/credit alerts 6% 16% 20% 26% 11% 10% 11%

7 For general, non-urgent banking matters, the most popular methods of communication for a customer to use to contact the bank were as follows: Requests for statements Checking your balance Setting up new Direct Debits or Standing Orders Opening and closing accounts Face Internet Telephone None of to Letter Text banking call these face platform 14% 9% 8% 20% 1% 38% 10% 9% 6% 7% 17% 2% 46% 11% 20% 9% 8% 16% 1% 40% 7% 33% 8% 10% 14% 0% 26% 9% For specific and urgent questions, the most popular methods of communication from customer to bank were: Face Internet Telephone None of to Letter Text banking call these face platform Being unexpectedly charged bank fees 29% 42% 6% 9% 1% 8% 5% Losing your card 17% 62% 3% 7% 1% 7% 4% Forgetting your PIN 19% 41% 5% 12% 1% 16% 6% Contact Devices The most popular electronic devices for accessing current account information are: Home PC (81%) Mobile phone to access internet (17%) Work PC (16%) Tablet (ipad etc) (6%)

8 None of these (4%) Not applicable do not use internet banking (11%) Tone of voice 37% prefer a formal tone when dealing with their current account provider, 22% prefer an informal tone while 38% say neither formal nor informal. Perhaps surprisingly, younger respondents were more likely to prefer a formal tone (50%) then over 55 s who were more evenly split (30% formal, 29% informal) Conclusion Opinium s quantitative consumer research shows the many challenges faced by Marketing, Insight and Communications Directors and Managers at UK financial services providers may be the year that sees the beginning of a significant shift of consumers away from those providers who have relied on inertia to retain customers towards those providers who are communicating with consumers in the way that they want. Customer loyalty has been tested in the last few years and the proposed changes in banking practices, especially regarding the switching of current accounts, coupled with new entrants like Metro Bank and Virgin Money, may well cause a marked change in consumer behaviour. There are many ways in which financial services communication can be improved. It appears that good customer service comes first. It all starts with listening to your own customers, which is why nationally-representative samples of UK adults can only go so far in explaining the likely behaviour of a specific institution s customers. Research is still one of the most powerful implements in the marketing toolkit when used in the right way. Ian Giles Head of Marketing & Insight, Opinium Research