Bank customers don’t like switching their current accounts to new competitors.
Small banks are struggling due to a customer unwillingness to move their accounts from established firms.
New banks are finding it difficult to grow due to the reluctance of consumers to change their bank accounts from their traditional providers, according to a review by the Office of Fair Trading.
The survey outlined a number of challenges to prospective entrants to the banking market. Customer loyalty to established brands and the consumer preference to bank with a local branch were two of the main issues that have made it difficult for start-up banks to attract new users.
Sarah Brooks, of Consumer Focus, said: “Often people are unhappy with their bank but still do not switch – put off by things going wrong, the hassle involved or a negative effect on their credit rating”.
She continued: “The unacceptably high level of bank complaints suggest that this loyalty is often misplaced. Until people start voting with their feet, banks have little incentive to raise their game and consumers may be missing out on better deals and service”.
However, the British Bankers’ Association said: “UK banks welcome open competition and choice for customers. The UK has a competitive market in High Street financial services with both more choice of provider and cheaper services than in many other countries”.
Some of the other report findings highlighted the lack of clear guidelines from the Financial Services Authority as a barrier. Many firms said problems with the complexity of the authorisation process that they have to undergo to accept deposits and complete transactions.
The lack of interbank lending following the financial crisis was also cited as a major concern.