A further piece was added to the ‘enabling switching puzzle’ at the end of March in the form of comparison site GoCompare’s Current Account Comparison tool. This allows customers to upload their transactional and balance data for the last year so its algorithm can establish which is the best current account offer in terms of pounds shillings and pence. Speaking to the government’s MiData initiative, this signals a step towards personalizing banking for mass market customers. We should welcome this development as it starts to move the conversation from a bank first to a customer first mindset, a move that banks will need to make if they are not to be disintermediated by more customer centric start-ups and digital innovators. It should also address the issue that customers struggle to understand the value benefit of switching accounts.
But unfortunately the new calculator also perfectly illustrates the very real complexity consumers now face when trying to work out what the best current account is for them.
When I tried it, the calculator told me I could be £209 better off in the first year if I switched to Yorkshire or Clydesdale Banks, largely through a cash joining fee and credit interest. This might have been of interest had I lived in Yorkshire or the central Belt of Scotland but I live in Oxford and occasionally use a branch (which the algorithm failed to spot). Looking down the results table the next offer I came to was Club Lloyds, through which I could gain £191 of credit interest. Not exactly surprising news given we switched our household billing /savings account to Club Lloyds a year ago.
So we’re back to the zero-benefit game - so far, so what?
Hopefully these are teething problems and GoCompare will refine the service by adding advanced search features such as Current Account Name, Channel usage (convenient branch location remains the standout reason for choice of brand). It will also hopefully better highlight how much of the stated benefit is ongoing and how much is a one-off introductory bonus – in my example I would have been £140 a year worse off after the first year had I switched to the first place result.
While it’s not all bad news - some of my younger colleagues more interested in overdraft fees & charges reported reliable results - other features of the fast-evolving bank rewards landscape will be more difficult to incorporate. With EU rules soon to cap Interchange fees, providers have had to look to alternative sources of funding for customer rewards. Several have introduced retailer-funded reward schemes where the potential returns depend on customers taking advantage of purchase offers. These sorts of offers are often driven by complex algorithms themselves and some follow customer spending behavior across debit and credit cards, making computing their value a seemingly impossible task for GoCompare.
In essence we have moved from a position where there was no value difference between banks to one where there is a very value difference between banks but one which seems beyond the practical boundaries of current Big Data analysis. In this situation, banks would be advised to observe a very simple maxim when it comes to offers designed to attract new customers (KISS) and to deploy the more complex data-driven solutions to provide existing customers with a little piece of effortless magic to reduce attrition.
Although positive switching is increasing, the net effect of banks upping their value may not give the regulators and the media the exciting headline numbers they hope for. It will however deliver better ongoing value to banking customers, driven by a genuine sense of competition.
For more information please contact Ian Davis at firstname.lastname@example.org.
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