FOOL'S EYE VIEW
Bank Customers Could Save £500 Million

By Jane Mack (TMFJane)
June 26, 2003

A new survey published by the Consumers' Association says the 'Big Four' banks continue to offer a substandard service to their customers compared to that of their smaller rivals.

According to the Which? annual current account satisfaction survey, less than 40% of customers of Barclays (LSE: BARC), Lloyds TSB (LSE: LLOY), NatWest and HSBC (LSE: HSBA) are happy with the service, compared to 91% of customers of the Internet bank, Smile.

It makes you wonder why more people don't switch if they're that unhappy!

The CA says that until recently, people were reluctant to switch partly because they weren't aware of the alternatives and partly because of concerns about moving direct debits. I suspect inertia also played a part.

But as the CA points out, the new direct debit transfer system introduced by the banks last year has simplified the process of switching. The regulations mean that the old bank now has to send the new bank details of direct debits and standing orders within five working days. The new bank then sets them all up for the new account without the customer having to deal with it all.

The latest Which? member research found that 95% of those who'd switched current accounts this year found it very straightforward. The reasons for switching were pretty straightforward, too:

• For better credit interest rates                           69%
• Because old bank gave poor service                 41%
• For better overdraft rates / charges                   25%

Last year, Which? launched its Switch with Which? campaign to combat what they describe as the Big Four's exploitation of their customers. Between them, they have 25 million customers -- about 70% of the market -- and only pay the vast majority of current account holders a paltry 0.1% interest along with overdraft rates that are up to twice as high as the best on the market.

The CA says customers of the Big Four could save more than £500 million a year if they switched to banks with better rates. It doesn't bode well for them if people are picking up on the idea that it's so easy to move.

Naturally, the Big Four aren't happy with the Which? report. According to HSBC, an independent MORI survey of 10,000 bank customers earlier this month put their own HSBC current account customer satisfaction levels at 92% and not in the mid-thirties.

And Lloyds TSB will pay interest of 2.53% to customers who pay in more than £1,000 a month while those paying in more than £2,000 a month can expect interest of 3.2% (although only if they register online and access their account online at least 6 times every 3 months).

Nevertheless, the Which? report claims that the top banks for customer satisfaction, and with good credit interest and overdraft rates, are Smile and First Direct. And of the main banks and building societies offering a branch network and good rates, Nationwide has the most satisfied customers.

Which? says there's never been a better time to switch banks and they want their Switch with Which? campaign to help consumers vote with their feet and give the Big Four something to think about.

Too true!

More: Alternatives to the Big Four -- the Fool's Banking Centre

The author owns shares in Lloyds TSB