Friday, 27 April 2018

TSB Customers Should Vote With Their Feet!

Bank customers have to react en masse for banks to change

The chaos TSB customers have faced this week will prove an interesting test case for what exactly it takes for customers to walk out the door in significant numbers.

History suggests that most will stay loyal.

Royal Bank of Scotland’s 2012 computer glitch, which caused mass disruptions for customers and delayed tens of millions of payments, led to a fine of £56m for the bank. Today, it has nearly two million more customers than it did then.

The truth is that most customers of banks and financial services firms don’t want to spare the effort required to leave, or don’t realise what else is out there.

Computer meltdowns are embarrassing, damage reputations and put off new joiners, but the impact is nearly always temporary.

Scandals that don’t affect customers’ day-to-day banking experience have even less effect. Regulators and shareholders may care about money laundering, rate fixing and mis-selling, but few current account customers do.

And when customers are willing to stick with their banks and insurers however they are treated, year after year, the firms lack any incentive to do better.

At the same time as TSB’s online meltdown, bank customers are being asked to rely ever more on online services. TSB itself announced the closure of 38 branches last year, and across all banks more than 50pc of branches have shut since 1989.

It is undeniably where the world is heading, but customers have to, as a bare minimum, be able to trust digital infrastructure.

If banks fail to deliver that peace of mind, customers should vote with their feet. It’s not hard to do. The Current Account Switch Service (Cass), which launched in 2013, has automated the process, and now customers can seamlessly switch banks while keeping all of their direct debits and regular payments intact.

If customers fail to act, banks will continue to rely on a level of inertia that gives them little incentive to improve. Open Banking will hopefully introduce greater competition to force the issue, but this will take time.

For now, customer inaction enables banks to get away with poor service, dismal rates, and technical disasters that would sink many other businesses, with few long term consequences.

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