On a recent Radio 4 show, Alasdair Smith mentioned that customers are still very loyal to the banks that hold their current accounts, despite the fact that many are paying substantial fees for unauthorised overdrafts and have been for many years.
If the financial impact of paying high overdraft fees isn’t a big enough incentive for customers to move banks, then is a government comparison site that requires the input of personal bank details really the tool that is going to change that behaviour?
For challenger banks the news this morning is two fold:
On the one hand a government comparison site gives them the ability to compete with the retail banks in a transparent way, and will crucially raise the profile of their business which will draw more customers looking for a better deal... it's free marketing.
On the other hand, if the government comparison site is not a success story and the reality of paying high unauthorised overdraft fees is also not a big enough motivator for customers to switch, then what kind of incentive is going to be enough to persuade these customers to move from their current provider to a new challenger bank service? Surely that would present a serious problem to any challenger bank looking to build it's customer base, particularly as challenger banks will have to secure mainstream customers rather than the early adopters who currently make up the significant proportion of their customer base if they are to truly threaten the established players?
At EO Executives, we have provided Senior and Executive level support to the high street banks and more recently have been working closely with a number of new challenger banks so am very interested to see how this develops.
Let me know in the comments what you think
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