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Consumers: Switching bank accounts – 8 out of 10 mystery shoppers faced difficulties
Brussels, 24 February 2012 - Switching your bank account may not be as easy as you hope. Results of a consumer market study published today show that more than two thirds of mystery shoppers were not able to switch their bank account successfully. The Commission's 2007 inquiry into the retail banking sector identified significant barriers to customer mobility. These findings were followed by extensive consultation which led the European Commission to urge the Banking Industry Committee (EBIC) to act. EBIC established a self regulatory initiative based on common principles, which was expected to bring clarity for consumers, but today's results show that self regulation in this case is clearly not delivering the desired results.
EU Health and Consumer Commissioner John Dalli said, "I would have liked to see this self regulation initiative working better and banks doing more to make switching easier for European consumers. Consumers need to be able to look for opportunities in the market without undue difficulty or fear of disruption of their payments or receipts. People should be able to change their bank account as easily as they do any other service."
EU Internal Market Commissioner Michel Barnier said "The results of the study published today explain why consumers change their banks so rarely. If consumers are not able to easily switch bank accounts, they cannot take advantage of better and cheaper banking services on offer elsewhere. The single market is thus deprived of the competitive drive that leads to innovation, cost savings and better quality banking services. This, in the long-run, can prove to be an obstacle to growth".
Mystery shopping exercise
In December 2010 the European Commission launched a mystery shopping exercise to monitor the effectiveness of the self regulation initiative, in all 27 EU Member States. Mystery shoppers conducted more than 1000 assessments involving more than 900 enquiries to test the provision of information and more than 400 tests for ease of switching.
Main findings
- "Times New Roman";mso-ansi-language:EN-GB;mso-fareast-language:EN-GB">The study found that only 19% of mystery shoppers were able to successfully open a bank account with a new bank and switch a standing order based on the process described in the Common Principles established through self-regulation.
- "Times New Roman";mso-ansi-language:EN-GB;mso-fareast-language:EN-GB">81% of mystery shoppers had problems switching and they identified the following weaknesses:
71% of banks would not assist in the transfer (therefore they did not follow the procedures outlined in the Common Principles).
7% of banks approached did not open an account and/or switch a standing order within fourteen working days.
3% of mystery shoppers found that the new bank refused to open a standard account. For example, shoppers were told they would have to receive their pay on the new account if they wanted to open it.
- "Times New Roman";mso-ansi-language:EN-GB;mso-fareast-language:EN-GB">Lack of information: while the study also found that 86% of consumers enquiring about a switch either in a bank branch, online or by telephone, did receive information from at least one information source, the level of information provided was found to vary widely. 14% of consumers received no information at all. The study also mentions a low level of awareness about switching among bank staff.
Next steps:
The European Commission is now assessing possible courses of action to adequately address the shortcomings identified in this study with switching.
For more information:
http://ec.europa.eu/consumers/rights/fin_serv_en.htm#fin
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Consumers' experience when switching bank accounts: "Times New Roman";mso-ansi-language:EN-GB;mso-fareast-language:EN-GB">The Commission's enquiry on retail banking (2007) found customers faced significant barriers when moving their accounts from one bank to another. Upon the Commission's request, the European Banking Industry Committee adopted Common Principles on bank account switching. to make that easier for consumers. See the results of our mystery shopping exercise which examined how effective this initiative was for consumers.
Other related DG SANCO reports: Retail Financial Services Report - Bank fees, pre-contractual information, advice and switching: "Times New Roman";mso-ansi-language:EN-GB;mso-fareast-language:EN-GB">The Consumer Markets Scoreboard is the main market monitoring instrument for the consumer policy area. Read the report The bank fees section of the report is based on a study. Also, DG SANCO work on Information – the basis for good consumer decision-making Read the report
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Extracts from the report:
Conclusions
The conclusions of this report are based around the process described in the Common Principles and are based on the data from the mystery shopping exercise. The recommendations are based on what GfK considers to be the best approach to resolving the issues outlined below.
‘The CP foresee that banks will provide consumers, who want to switch their current account, with clear and complete information.’
Key conclusions – A third of mystery shoppers could not find any information on bank account switching on the bank website they visited. Four in ten were not provided with step by step information by the bank staff member they spoke to when making an enquiry and eight in ten were not provided with any literature about bank account switching when making their enquiry. In summary, therefore, the information provided about bank account switching is incomplete as in many cases it is simply not provided. The clarity of the information can be assessed by analysing the content of the information and comparing that to the processes outlined in the Common Principles. Over four in ten (43%) of those visiting a bank website were unable to find step by step information on the process of switching bank accounts and 45% were not given step by step information on the process of switching bank accounts by the bank staff they encountered during their enquiry. Additionally, there are considerable differences in the content of literature provided by banks about bank account switching.
Key recommendations – All websites of banks that offer bank accounts should provide information on bank account switching and the processes involved. If necessary links can be made to national banking associations where this information should be available. Whenever a customer enquires about switching their bank account in a branch they should be provided with literature relating to bank account switching and the process involved and all staff members should be aware of this literature. Banks can either develop this literature themselves (although it should be in line with the Common Principles) or use literature provided by national banking associations. Staff members should be available to customers (either in branch, on the telephone or online) who have knowledge of bank accounts and switching processes. They should be trained to provide detailed information about the switching processes and guide the customer through the transfer.
color:#333333;">‘Information regarding the the responsiblities of the ‘new’ and ‘former’ bank , as well as those of the consumer in the course of the switching process, and the timescale of the process, is available to consumers in all Member States’
Key conclusions – Even in circumstances where information about the switching process is provided to consumers, it does not always refer to responsibilities and timescales as below. Three quarters (73%) of shoppers searching for information via bank websites found information on how long each step took in the switching process. However, eight in ten (79%) were not given information on how long each step took by bank staff and where they were, there were inconsistencies in the timescales provided. In terms of the bank responsibilities , the piece of information that is most commonly provided to consumers enquiring about switching their bank account relates to the fact that the new bank would transfer the direct debits and standing orders. For those looking online over four in ten (45%) could not find this information and for those making an enquiry, nearly six in ten (57%) were not given this information by bank staff.
Key recommendations – In order to provide information about responsibilities and timescales, information about bank account switching must be available online, via literature and through branch staff – points which are dealt with above. Once available, the information provided online and in literature must include the key points about timescales and bank responsibilities.
‘In all banking communities, the facilitation of the switching process allows the consumer to choose the ‘new’ bank as a primary contact point for account switching. For all Member States, the ‘new’ bank will offer the necessary functions to the consumers in the primary contact point scenario.’
Key conclusions – Given that eight in ten shoppers (81%) were unable to switch their standing order, with the vast majority told to conduct the transfer themselves, it is clear that in the majority of cases the ‘new’ bank does not act as the primary contact point. As such, the necessary functions are not offered. Additionally, amongst those mystery shoppers making an enquiry about switching their bank account Final Report Produced by GfK Page 487 only a quarter (26%) were told they would not have to contact their ‘old’ bank during the switching procedure and only 18% were told about a ‘dedicated switching team’. This does indicate that some banks do employ a team to act as a primary contact point, but only in the minority of cases.
Key recommendations – In order to allow the consumer to choose the ‘new’ bank as a primary contact point for account switching, banks must have the resource in place. The approach for a number of the banks assessed was to have a dedicated switching team in place, which would act as the primary point of contact and deal with the ‘old’ bank. This appears to be the best approach.
color:#333333;">‘A guide to switching and related information – which has been drafted in the national language –is available.’
Key conclusions – The mystery shopping exercise did not measure whether information on switching was available, but whether it was provided. Four in five (80%) of shoppers making an enquiry about switching their bank account were not offered any leaflets / literature about bank account switching; and 88% of those undertaking an application to switch their bank account were not provided with a User Guide. A higher number of shoppers who successfully switched their bank account received a User Guide, but only slightly less than a quarter (23%).
Key recommendations – User Guides are employed by some banks and therefore, there is an example for banks who do not provide user guides to follow. As outlined above, all banks should provide clear and complete literature to all customers enquiring about switching their current account.
‘Procedures are in place to help consumers provide new account details to third parties regarding direct debits’
Key conclusions – It is clear that banks themselves should not be responsible for contacting third parties, however the Common Principles do state that procedures should be in place for consumers to provide account details to third parties. The most appropriate way of doing this is by providing consumers with ‘draft letters’, however these only appear to be provided in a minority of cases. A third (31%) of shoppers were able to find information about the provision of letter templates when looking online and only one in nine (11%) shoppers who went through the process of applying to switch their bank account were offered draft letters.
Key recommendations – Although only made available in the minority of cases, some banks do appear to have the facility to offer draft letters. As such, there are example templates in place that other banks can use.
‘The ‘new’ bank is able to request the ‘former’ bank to close standing orders for credit transfers and stop direct debits.’
Key conclusions – One in five (19%) of shoppers were able to successfully switch their bank account with the majority told that the bank could not support the switch. Therefore, in these cases, the shoppers were told that the ‘new’ bank did not have processes in place to request that the ‘old’ bank closes standing orders and direct debits. Slightly over four in ten shoppers (43%) could find information online about the ‘new’ bank instructing the ‘old’ bank to cancel direct debits and standing orders, which indicates that the process is in place within a high proportion of banks. However, only a third of shoppers (32%) making an enquiry and only 28% of those who undertook the application were told that payments would be cancelled at the old bank.
Key recommendations – Firstly, if processes are in place which allow the ‘new’ bank to communicate with the ‘old’ bank and request them to close standing orders and direct debits, this should be publisiced in literature and on websites; and bank staff should be trained to provide this information. If these processes are not in place, national banking associations in every Member State should ensure that communication between banks is improved and such processes are facilitated.
‘The ‘new’ bank will also establish standing orders and direct debits on the new account. For this purpose relevant procedures allowing the ‘former’ bank to transfer available information to identify standing orders and direct debits have been put in place.’ ‘In addition, the ‘former’ bank will, in case the consumer wishes to close the account held at the bank, transfer any available positive balance to the new account.’
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1 Overview of the Assignment and Introductory Note.
The following report provides a detailed overview of the findings for the mystery shopping assignment relating to ‘consumers’ experiences with bank account switching with reference to the Common Principles on Bank Account Switching’. This report follows on from the inception report which provided details of the process, including the questionnaire, briefing notes and sample; and the interim report. The questionnaire and briefing notes are provided in appendices III and IV. This report is based on 1,350 completed mystery shopping assessments, with the sample breakdown provided in Chapter 2 (page 16).
Throughout the report the following references will be used :
· The Study – the assignment
· Shoppers – these refer to the mystery shoppers used to conduct the fieldwork.
· Assessments – the assessments undertaken by the mystery shoppers.
· Enquiries – those assessments where shoppers were instructed to make an enquiry about switching their bank account, but NOT undertake the switch
· Switchers – those assessments where shoppers were instructed to make an enquiry about switching their bank account AND undertake the switch
· Successful Switchers – those assessments undertaken by the ‘switchers’ who went through a successful bank account application and completed the switch (defined as switching a standing order)
· Channel – the approach taken (i.e. face to face, telephone or online)
· ‘New bank’ – the bank at which the switching enquiry was made / where their account was switched to.
· ‘Old bank’ – where the shopper held their bank account / where their account was switched from.
The title of this assignment is the ‘Consumer Market Study on the on the consumers’ experiences with bank account switching with reference to the Common Principles on Bank Account Switching’. The overall task of the study was to ‘monitor and evaluate the effectiveness for consumers of the implementation of the Common Principles on Bank Account Switching (CP)’, in addition to understanding the consumer experience when attempting to switch a bank account. More specifically the study was designed to evaluate compliance with the CP in relation to the ‘detailed elements of information and staff facilitation of switching which can be physically examined in banks, examined visually on websites and through oral and written communication with bank staff’. In addition the study examined the ‘live switching process’ in order to examine the extent to which ‘CP obligations are complied with in terms of setting up new electronic transfers in order to switch credit transfers and direct debits at the new bank’ (i.e. the bank to which the switch is being made). For the purposes of this study, the ‘live switching process’ involved mystery shoppers switching one or more standing orders from their ‘old’ bank to the ‘new’ bank.
The study covered all 27 Member States
The key task of the study was to ‘obtain data on the quality and outcomes for consumers who wish to switch bank accounts’ and the expectation is that CP should be applied consistently within each Member State. Within this overriding objective, there were four key requirements as below :
1. To examine the extent to which banks provide customers who want to switch their bank account with clear and comprehensive information.
2. To examine to what extent staff in bank branches and through written and telephone enquiries are aware of local switching procedures and are able to assist the switching.
3. To collect data in terms of the banks’ compliance in relation to their obligations.
4. Obtain data on the time and effort involved in submitting to a mystery shopping switching procedure.
The ‘terms of reference’ also referred to the following qualitative analyses : a. A qualitative analysis of the effectiveness of information materials (the switching leaflets and guides) b. A qualitative analysis of the support for and assistance with switching by bank staff. c. A qualitative analysis of the difficulties encountered and the reasons for non-compliance with the Common Principles on Bank Account Switching
In essence tasks 1 – 4 are dealt with using the quantitative data from the mystery shopping questionnaire. The ‘qualitative analyses’ are based on verbatim responses provided by shoppers in relation to relevant questions.
The requirements of each of these objectives are provided in more detail on pages 7 to 11.
Task 1 - The Provision of Clear and Comprehensive Information.
The Common Principles state that the ‘bank will provide consumers, who want to switch their current account, with clear and complete information.’ In addition the Common Principles state that ‘the information is also available on ‘durable medium’ and that a ‘guide to switching and related information – which has been drafted in the national language – is available.’ As the provision of clear and complete information applies to any consumer who wants to switch their current account, this task covers the information provided to consumers who make an enquiry about potentially switching their bank account AND to those consumers who actually switch their bank account . The task covers the information provided by staff, the provision of switching guides and leaflets, as well as information on websites. As such, the key points that are analysed are :
a. Whether the shoppers were provided with information relating to the bank account switching process, including the information given by staff, the provision of relevant leaflets or user guides; and whether the information was available on durable medium (e.g. bank websites).
b. Whether the information was clear and whether it included information on the Common Principles and Codes of Conduct. More specifically, in relation to the information provided, the following elements are analysed :
c. Whether the information on switching describes the respective responsibilities of the new and former bank.
d. Whether the information provided informs the consumer of his right to use the new bank as his Primary Contact Point and also as intermediary for his contacts with the old bank.
e. Whether the information on the timescales offered to consumers who wish to switch bank accounts is in compliance with the CP.
f. Whether the information provided on fees is applicable.
g. Whether the information explains the pre-conditions necessary for a request by the consumer to close his / her old account.
h. Whether the following standard letters were made available to a consumers wishing to switch accounts – (a) draft letter for having incoming payments deposited into a new account (b) draft letter for transferring standing orders to a new account and (c) draft letter asking to close a bank account.
In summary, this task covers the information provided to consumers about the switching process, the format of the information and whether the information is clear and in line with the Common Principles.
Task 2 - Staff awareness and assistance with switching procedures.
Staff are pivotal in providing ‘clear and complete information’ and in order to do this they must be aware of the switching processes. This awareness is partly covered by task 1 in relation to the provision of information, but is also covered in task 2 in relation to staff awareness of switching processes at the point of application and their assistance (as representatives of their bank) in the switching process itself. The Common Principles envisage a number of processes for banks to follow in assisting the switching process and these are examined within task 2. Therefore the main focus of this task is on those consumers who switch their bank account; and covers face-to-face, online and telephone enquiries. This task includes an examination of bank staff in understanding the extent to which:
a. The bank supports the switching process
b. Services are offered by the new bank to facilitate switching
c. The timescales offered by staff are reasonable in practice
d. The level of fees, if any, can be justified – i.e. can be explained by staff
In summary, the focus is on the degree to which banks support the switching process. As opposed to examining what the banks say they will do when providing information (i.e. task 1), this task examines what the banks actually do in practice when a consumer wants to switch their bank account. The Common Principles are based on the fact that the ‘new’ bank will assist the customer in switching their bank account and therefore assume that banks are willing and able to do this. However, if the bank is unwilling to undertake the switch on behalf of the customer they will not meet any obligations under the Common Principles. As such this is an important element of task 2.
Task 3 - Compliance by banks with their obligations.
The Common Principles foresee obligations of both the ‘old’ and ‘new’ banks in relation to the switching process. These obligations are examined in task 3. As task 3 looks specifically at the switching process, those consumers who switch their bank account are examined. The main elements covered relate to the ‘new’ bank being the primary point of contact in overseeing the switch.
a. The obligations of the ‘new bank’ are to contact the ‘old bank’ and request information on standing orders for credit transfers, request the old bank to close standing orders for credit transfers and establish standing orders for credit transfers on the new account.
b. The obligations of the ‘old bank’ are to provide information to the ‘new bank’ on the consumer’s standing orders without charge to the consumer, close standing orders, transfer any available positive account balance to the new account, close the account (unless problems arise) and communicate switching fees (if applicable). Final
Task 4 - Obtain data on the time and effort involved in submitting to a mystery shopping switching procedure.
The process of switching a bank account involves gathering information, applying for the new account and switching the old account. This task provides an overview of the time and effort taken at each step, as well as analysing feedback from the shoppers themselves in terms of the ‘ease’ of the process.
Task 5 - Additional analyses.
The overall objective of the study is to understand whether the Common Principles are being adhered to in terms of consumers switching their bank accounts. Moreover, another important objective of the study was to understand what difficulties were encountered by consumers wishing to switch their bank account. The Common Principles themselves are designed to make the process of switching a bank account as easy for the consumers as possible and therefore, the focus of this study has to take this into account. However, other factors affect the ability of a consumer to switch their bank account and these were factors also examined. For example, although the Common Principles does not cover the actual opening of a new bank account, this is clearly a necessary step in switching a bank account. Therefore, the inability of a consumer to open a new bank account either through their own choice or because of a bank’s processes and product offering were also analysed, as outlined below : · The prevention of consumers opening a new account because of non-compliance with bank credit scoring.
· The prevention of consumers opening a new account because the requested account type was not made available to the consumer.
· The prevention of consumers opening a new account because of other reasons relating to bank policy (e.g. the stipulation that all accounts had to be held with the same bank).
· The prevention of consumers opening a new account because of other reasons relating to a bank’s product offering (e.g. account fees)
The difficulties faced by some consumers in trying to open a new bank account are also highlighted in the report as they are relevant to the switching process in general, with a distinction made between elements relating to the Common Principles and those that do not. Finally, the study also looks at the importance of bank account switching in terms of levels of satisfaction experienced by consumers either looking for information or actually switching their bank account.
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