Banks' efforts to woo new customers fail

Increased efforts by the UK's high street banks to woo new current account customers with offers of higher rates of interest and more add-on extras are still failing, with the number of customers switching their accounts last year remaining at less than 1 per cent.

Increased efforts by the UK's high street banks to woo new current account customers with offers of higher rates of interest and more add-on extras are still failing, with the number of customers switching their accounts last year remaining at less than 1 per cent.

New research published by Datamonitor in conjunction with Mori this week, reveals that just 1 in 100 current account holders switched banks in 2003, about the same as the previous five years.

The news will come as a major disappointment to Britain's largest banks, who have spent millions of pounds creating and promoting new current account deals over the past three years in a bid to win customers from their rivals.

The war began in earnest three years ago as Halifax began offering 3 per cent interest on its current accounts. Over the past 18 months, the likes of Abbey, Alliance & Leicester, Lloyds TSB and Nationwide have all followed suit, hiking interest rates on their current accounts. Several banks have also begun to offer other features such as free travel insurance and free roadside cover alongside their current accounts, in a bid to encourage customers to move.

Kieran Hines, the author of the Datamonitor report, said customers' inertia remains the biggest factor in the current account market, with few people responding to the better deals offered by alternative providers.

"The majority of customers don't want to switch accounts because they're generally very happy with the services they receive at the moment," he said.

"By and large, customers are not interested in rates, because their current account balances are generally low and fluctuating."

A recent Datamonitor survey revealed that 91 per cent of customers were either very or fairly satisfied with their current account. Mr Hines said that it was only the 1 per cent, who said that they were very dissatisfied, that had shown a willingness to switch, although there is also a minority of serial account switchers.

He added that when customers do switch, they do tend to pay attention to the rates available, and look for the best deals. But until the moment they become dissatisfied with their bank's service, they remain uninterested in better offers. He said the banks were keen to acquire more current account customers for the cross-selling opportunities.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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