It is often said that people are more likely to get divorced than to switch their bank account. And this is, in fact, actually quite true!
But despite financial inducements and efforts by financial regulators to get more people to switch bank accounts, fewer people are doing so. In the last 12 months, just over a million people moved their current accounts, according to Bacs. That represents a drop of 4.7% on the previous 12 months.
According to Hannah Maundrell, editor of money.co.uk: "With 65 million current account holders in the UK, movement is minimal. Even with big cash incentives on the table, people just aren't switching."
For example, Marks and Spencer offers up to £220 worth of incentives to switch banks, the Co-op offers £150 to new account holders, and the Halifax offers £125.
The Competition and Markets Authority (CMA) has spent over 18 months looking at ways of getting more people to switch accounts. It claims that consumers could save an average of £116 a year by doing so.
Of those who did switch banks, the Halifax proved to be the most popular new bank, attracting 31,000 customers. Barclays was the biggest loser, with a net loss of 27,000.
Previously Santander was one of the most popular banks to switch to, as it offers a cashback scheme of up to 3%. However, last month it raised the fee for its 123 account to £5 a month.
"Details of the intended price hike first came to light on 14th September 2015, and it appears to have had a dramatic impact on the net number of new accounts opened," said Andrew Hagger of Moneycomms.co.uk.
What can we learn from this?
If you entered a lottery and won £220, would you refuse to accept the prize?!? Of course not! Yet when they are offered up to £220 simply for switching banks, the vast majority of the British public would turn down this free money!
What this clearly proves is that customers don’t just want ‘bribes’ to change their loyalty. Marketing academics refer to these sort of tactics as ‘behavioural loyalty’. It means trying to buy a customer’s loyalty in the short term by offering incentives, but not looking at the deeper emotional issues behind why someone is really loyal to a company or brand. It’s something that marketing experts call ’attitudinal loyalty’. You can’t just buy attitudinal loyalty through cash incentives.
Over the last few years, the bank that has always come top in customer satisfaction surveys has been First Direct. Research shows that the reason customers love First Direct is because of their excellent service standards and the way they treat their customers on a daily basis, not just once-in-a-lifetime ‘bribes’. Their whole ethos is based around fostering attitudinal loyalty, not just behavioural loyalty - and clearly it works.
There are several other reasons why customers are generally reluctant to switch banks, and these are examined in ‘The Loyalty Gap: The 7 Secrets of Customer Loyalty’ by Darren Bugg, which will be published in the Spring.
The Loyalty GapTM is a registered trademark.