While the government wants UK consumers to vote with their feet in energy, communications, and banking markets, with a set of ‘Switching Principles’ proposed last year, in-depth research shows that trust and loyalty have a big part to play in customers choosing to stick with the status quo.
Bacs partnered with the University of Bristol to look closely at the motivators for and barriers to switching; this followed reports from energy body Ofgem that more than three quarters of households have not changed their energy provider, and the Current Account Switch Service’s own figures that showed only three per cent of current account holders have moved between banks in the past two years.
Anne Pieckielon, Bacs’ Director of Product and Strategy, said: “As owners of the Current Account Switch Service, it’s important that we understand more about what the triggers are for people to move providers, and what prevents them from doing so. This research will be used to inform the way that we take the service forward, making sure that it works for everyone. Even more than that, though, we believe the results will be of interest and use to sectors other than our own, and that, through this project, we can make our own small contribution to encouraging a truly mobile marketplace in the UK.”
The first of three papers: ‘Consumer Engagement in the Current Account Market: Why people don’t switch current accounts’ is published today [Tuesday 1 March].
Headline findings include:
- Inertia: There is a high level of consumer inertia in the market, possibly due to the lack of product differentiation and a lack of ‘trigger points’ such as a contract end date that in other industries may act as a motivation for consumers to reconsider their providers.
- Complexity: There is a high complexity in current account products due to their associated add-on services and products, such as insurance and loan facilities, which makes it difficult for consumers to compare different products from different providers. Consequently it is difficult for consumers to see the potential advantages of switching.
- Engagement: Consumers who are likely to benefit the most from switching are usually those less engaged in the current account market, for a variety of commercial, educational and societal reasons.
The first paper also covers how to reliably predict and forecast switching volumes. The two subsequent reports will focus on the external ‘shocks’ influencing decisions to switch as well as the drivers behind considering a move, and the reasons consumers become disengaged along with steps that can break this “inertia loop” so they can make switching decisions that are right for them.
The research project has also generated a new approach, called “nudge-plus”, which takes the concept of “nudging” – providing gentle encouragement for people to change their behaviour – with an in-depth understanding of the learning journey people embark on when it comes to making a change.
Professor Ruth Crick, Reader in Learning Analytics and Engineering Leadership in the Systems Centre at the University of Bristol, said: “It’s a real pleasure to work with a forward-thinking company like Bacs. This research project has enabled us to integrate our work on learning journeys to identify what motivates people to make decisions; what we are calling our “nudge-plus” approach will be of critical importance in competitive markets in the future. We’re looking forward to continuing and enhancing our relationship with Bacs to continue developing our understanding of consumer behaviour, and how this can be influenced.”
Paper
‘Consumer Engagement in the Current Account Market: Why people don’t switch current accounts’ a Bacs Research Paper in partnership with Ruth Crick and Colin Taylor from the University of Bristol.
Subsequent papers will be published in the coming months.