Current accounts 'impossible to compare'
DIFFICULTY in comparing one current account with another is preventing us from switching to better value deals, according to a new report.
Research carried out by TNS on behalf of Tesco Bank found that we have "no effective basis for comparison" when considering a new account.
One telling result of this is that only 14% of people actually believe there is a difference between the current accounts offered by different banks.
What's it worth?
Despite the streamlined switching rules that came into force in 2013, the number of people actually switching is at its lowest rate for three years.
This is predominantly because we don't understand the value of our current accounts to start with, say Tesco Bank.
More than half - 55% - of us are unable to work out whether our current accounts are good value in terms of what they cost us, and what we receive in return.
Difficulty in comparing things like interest on credit, overdraft fees and charges other banks charges means that four out of five people aren't sure whether their current account is better value than accounts from different banks.
Some are also dubious about the finer details of the switching process, as we've covered before.
"People need a simple way to compare all the separate elements of a bank account", says Andrew Hagger of Moneycomms. He continues:
"If consumers aren't confident that moving their account will be of financial benefit then they'll stick where they are, even though their existing account may be a bad fit."
The confusion surrounding the relative benefits of different current accounts works in the banks' favour - and generates millions of pounds in profits.
Because we're seemingly happy to stick with what we know, banks don't feel the need to waste resources trying to vie for our attention and reduce things like overdraft fees.
Luckily for us, this hasn't gone unnoticed.
Smoke and mirrors
In July 2014, the Competitions and Markets Authority (CMA) launched an investigation into the lack of competition in the retail banking sector.
They were concerned that too few people were shopping around for current accounts and switching between banks. Their figures suggested that just 3% of people switch each year.
The chief cause, they believed, was "limited transparency, and difficulties for customers in making comparisons between banks".
This was despite banks promising to roll out transparency initiatives previously agreed with the Office of Fair Trading (OFT) in 2010.
Many customers never received an annual summary that was supposed to improve their "understanding of the costs of their account and therefore aid decision making".
Breaking the hold
The CMA will publish their final report in April 2016. In the meantime, the Government have said they will do their bit to help shake up the sector and "improve outcomes" for customers.
Harriett Baldwin, economic secretary to the Treasury, recently said that they were "committed to increasing competition in banking".
The problem is that, according to the CMA, the largest four providers have a hold over 77% of the current account market [pdf] in the UK.
Before they closed in 2014, the OFT said this kind of concentration of power resulted in a marketplace where a "lack of dynamism from providers combines with consumer inertia to deliver sub-optimal outcomes" for us and for the wider economy.
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