Bulb shines disturbing light on current account market

The energy company found current account switching has actually enhanced the power of the industry's big guns and wants to prevent something similar from happening in its market

James Moore
Chief Business Commentator
Friday 08 December 2017 17:30 GMT
Have the bigger banks emerged as the winners from easier current account switching?
Have the bigger banks emerged as the winners from easier current account switching? (AP)

The challenge laid down by challenger banks hasn’t proved quite as challenging to the industry's establishment as policymakers might have hoped, at least according to figures ferreted out by energy company Bulb.

Using data provided by payments company Bacs, which oversees the current account switching service, Bulb found that smaller banks made a net loss of 176,063 customers over the last four years.

During the same period the big guns HSBC, Barclays, Lloyds, RBS and Santander, made a net gain of 218,092.

Notwithstanding the fact that the last named of those would have you believe that it’s a challenger, it’s still a striking finding.

But at this point you’re probably asking what on earth it has to do with an outfit like Bulb? Well switching, and encouraging it, is all the rage in energy at the moment where, as with banking, ministers and regulators are keen to see a little competitive vim introduced into the market to break the dominance of the big six providers and provide a better deal for the consumer.

In a submission to energy watchdog OfGem it argues that the big banks responded to launch of the switching service by deploying large advertising budgets and promotional offers to keep customers in their grip.

It points to the Lloyds owned Halifax’s launch a £100 one-off switching incentive plus £5 a month if a customer stays in credit. Or how about HSBC’s First Direct, which Bulb says upgraded its switching offer from £100 to £125 to coincide with the service's launch.

Bulb uses the information to insist that Ofgem “must ensure that any switching service should consider extra information for customers to make informed choices”.

This, it argues, should consider “price, renewable energy mix, and customer service quality” if the regulator wants to avoid the big guns using their financial clout to squeeze the smaller operators out.

I wouldn’t disagree with part of that thesis. The provision of such information would be worthwhile. It’s just the sort of thing I’d like to see before jumping in with a new supplier.

OfGem should also be wary of British Gas owner Centrica’s promise to axe pricey standard variable tariffs in favour of an emergency tariff, which looks very much like a standard variable tariff by another name. Centrica has also tabled proposals to reform the market to make life easier for, you've guessed it, Centrica and British Gas.

However, it’s notable that the big six, of which British Gas is one, don’t exactly feature prominently in the best buy tables provided by YouSwitch, which already facilitates energy switching. So Bulb wouldn’t appear to have all that much to worry about as things stand.

Where it may have done us all a valuable service is in its highlighting of a potential problem in banking, where the big guns would appear to be tightening their dominance of a market in which they had more power than was healthy before easy switching got started.

The people overseeing that market at the Financial Conduct Authority, and perhaps those at the Competition & Markets Authority too, should pay every bit as much attention to what Bulb has had to say as OfGem should.

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