The bank account switching service does not help customers who rely on overdrafts, TSB Bank chief Paul Pester complained yesterday.
It is harder for those customers to move, letting the big banks keep hold of them – and their juicy fees – with little competition, he claimed.
“Those customers who could benefit most from switching their bank accounts, those who are heavy overdraft users, those who incur other fees, are only half as likely to switch as other customers,” the TSB chief told think-tank New City Agenda in parliament. “As good as the switching service is, it doesn’t allow customers to transfer their overdrafts, which many customers rely on to run their lives day to day.”
Banks typically wait until they have many months of transaction data before they offer a new customer an overdraft, so those who rely on the service are unlikely to risk switching.
“Small switching numbers magnify the advantages enjoyed by the large incumbent banks, who can use the profits generated by the large pools of very valuable customers – the overdraft users, who are less likely to switch – to maintain their market share. And that is a barrier to entry to new players,” Pester said.