'Misplaced' loyalty to banks is bad for economy
Sunday 07 November 2010
Customer loyalty to banks is often "misplaced", according to the soon-to-be-defunct watchdog Consumer Focus.
The "unacceptably high level of complaints" shows that banks provide a poor service to their customers, yet "just 7 per cent of current accounts are switched each year", said Sarah Brooks, the head of financial services at the watchdog. The potential for direct debits not being paid and administrative errors is often cited for the low level of current-account switching, surveys have shown.
Consumer Focus made its remarks as the Office of Fair Trading released a report into the barriers to entry in UK banking. The OFT concluded that there were opportunities for new entrants to the banking market, but that these would face considerable difficulty in persuading customers to switch, out of a combination of brand loyalty and a preference for banks with many branches.
Clive Maxwell, the OFT's executive director for goods, services and mergers, said that these barriers were a negative for customers and the economy as a whole. He added: "Vigorous competition in retail banking is vital for personal and small-business customers."
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