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Thursday, July 22, 1999 Published at 17:20 GMT 18:20 UK

Business: Your Money

Not a moving account

The relationship between customer and bank is not always happy

Go shopping and you can have a great time picking up bargains. Run a bank account and it's not such fun.

As the supermarket wars have hotted up, big stores are scrambling over themselves to provide better services, greater convenience, wider product ranges and cheaper bills in an effort to win customers.

But the banks are failing to do the same. Why the difference?

[ image:  ]
Both supermarkets and banks have come under fire for their excessive profits: the Competition Commission is currently holding an inquiry on the big grocery retailers, and the Cruickshank Report has condemned banks for being unco-operative.

But banks are failing to meet customers' wishes, despite repeated surveys showing many people are dissatisfied.

The most recent survey - by a bank itself - showed some 2.5m customers were unhappy with their accounts.

The poll also showed nearly half of all adults believed people were more likely to divorce than change current account.

And maybe - just maybe - therein lies the answer: the big banks know just how reluctant customers are to make the switch, so they have little incentive to try to please their customers. Account holders are just not as fickle as supermarket shoppers.

Thin profits

According to Independent Banking Advisory Service (IBAS), people's inertia is largely down to the inconvenience of moving, a fear of things not going smoothly and fear of losing any benefit they may have accrued from years of loyalty.

[ image: Many current accounts cost the banks money to run]
Many current accounts cost the banks money to run
"There has been a great reluctance to move, despite their treatment," says IBAS chief executive Eddie Weatherill.

Most people are still with the same bank they started out with and banks pretty much have a captive audience.

Another explanation for banks' lack of competitiveness is that they actually make little money from most current account customers. Many actually cost the banks money to run. It's the insurance, credit cards, mortgages and investments which boost profits.

So they are now trying to increase profits on current accounts.

One example is the trend for "package deal" accounts, which offer preferential rates on products such as loans, credit cards and insurance - for a monthly charge of about £6.

The Consumers' Association says that this is simply a way of introducing bank charges and rarely offers good value for customers.

'One-way loyalty'

IBAS encourages people to look for the best service without excessive costs. Mr Weatherill says: "We try to persuade people to use their clout. Consumer power can count for a lot of it's marshalled well. We're not saying it's trouble-free but people shouldn't put up with poor treatment.

"If someone owes a lot of money, their bank will make it hard for them to move - for the interest - and if they insist on moving, will make sure either their new bank doesn't want that person or there's no money left to move," he says.

As for the benefit of staying with one bank, it counts for nothing, IBAS says.

[ image:  ]
"The loyalty is all one-way. Banks can drop you any time they want - we've seen businesses dropped by a bank after 50 years just because their accounts weren't healthy one year. Consideration of loyalty shouldn't come into the equation."

What should come into the equation are comparisons of service and cost, says Mr Weatherill.

More education about the banking system is needed, he believes, so people do not unwittingly incur charges and penalties, by drawing on funds when they thought a cheque had been cleared, for example.

"People are being plundered - not always deliberately - but banks take advantage of people's ignorance. NatWest charges £3.50 a day for excess borrowing if a cheque hasn't cleared."

People power

He says customers' traditional resistance to moving accounts is changing quickly - in the last year more people have switched accounts than in any of the previous five years.

[ image: Some customers believe service is not up to scratch]
Some customers believe service is not up to scratch
Barclays, for example, has persuaded more than 675,000 customers to switch to its Additions package and Lloyds' new Gold Service has about 500,000. Both are fee-based accounts.

There have been fears that if bank charges become routine again, anyone with an unprofitable current account may be priced out of the market.

Consumer power, however, may keep them at bay. Some customers have switched away from the Abbey National in protest at its introducing a £5 charge for paying bills over the counter.

It is ironic that just at a time of increasing awareness of consumer power, the banks are finding more reasons than ever to introduce charges.

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