The Bold War

It’s Time For Us To Break Up

This is very difficult for me to say…
…we have had a really good run together…but it’s time…
…it’s time we moved on… It’s time for us to break up…
…it’s not you, it’s me... 
…I have new needs…

Sounds like a classic break up conversation doesn’t it? Imagine I told you that this week you are likely to hear this conversation across thousands of households across the UK.  No, the colder weather isn’t going to result in a mass scale divorce crises.  It is instead tied to the launch of the new UK bank account switching rules that make it easier and faster to move bank accounts.  So should you consider breaking up with your bank? 

We all know that ordinary consumers have had enough of banks.  Recent scandals including payment protection insurance and LIBOR, on top of the increased regularity of service downtime mean customers are fed up.  A quick search of ‘I hate my bank’ in Google or Twitter will leave you with a steady supply of angry rhetoric.  The only reason consumers don’t move is because of the ‘same crap, different smell’ syndrome that has permeated throughout the banking industry over the last decade.  In highly competitive and fluid industries such as air transport, retail and even cafes, good quality customer service is a necessity for survival. 

The new rules are targeted at reducing the divide between the number of consumers who want to switch banks and those that do.  The changes are part of a phased rollout of initiatives tentatively planned over the next few years to increase UK high street banking competition.  The also directly attack the reason banks have been able to get away with poor service for so long; a lack of choice and a perception that moving banks is complicated.  Due to this, banks have rarely had the need or the desire to listen to customers.  They have broadly stuck to the same services and products because they generate profits without even trying to meet customer needs.  Depressingly, the big four UK banks actually hold a larger share of the market than they did ten years ago. 

The new UK account switching rules should go some way to improving the situation.  By introducing a guaranteed 7 day switching process, automated redirection of payments and limited work for the customer, the government has tackled the major pain points customers have identified.  Is it enough? Probably not.  It is a good first step? Yes.  Similar changes were rolled out in Australia about 12 months ago and the improvements have been marginal.  A lack of significant marketing has stuttered awareness.  Industry insiders also alarmingly claim that the Australian banks have bandied together to conceal the changes.  Let’s hope that doesn’t happen here.

Marketing for one is unlikely to be an issue in the UK.  Recent reports suggest that all the majors have significant television, radio and outdoor campaigns at the ready.  Announcements from NatWest and Halifax over the last fortnight regarding new cashback account propositions also prove that the industry is already starting to simmer.  Cashback rewards present a significant new theme in the arms race for bank product features.  You should expect to see more announcements over the coming weeks as banks look to protect their current base and steal customers from competitors.  As less and less customers are concerned about the proximity of their nearest branch, look for more pure online and mobile players to also enter the scene.

By bringing more choice to market and making it easier to move banks the government is taking the necessary steps to increase competition.  More competition will encourage both the established players and new entrants to differentiate and offer better products and services.  Customers will have greater choice as the oligopoly scatters.  In turn they will be able to select financial service providers that are better suited to their specific needs.  Power will return back to the consumer, factory banking will disappear and services tailored to the individual will prosper. I for one say bring it on; hear, hear!

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