Portable Accounts:
Products that ‘do what they say on the tin’ Please! Just do what it says on your tin

Opaque costs and unfair charging structures are at the heart of customer dissatisfaction with banks, says ADAM PHILLIPS Chair of the Financial Services Consumer Panel.

When you talk to consumers about fairness in financial services you get some pretty stark conclusions. They simply don’t think financial services are fair compared to other retail experiences. Moreover, according to research conducted for our recent report* on fairness in financial services, consumers hark back to an era of “old fashioned bank managers” which haven’t really existed in 30 years.

What’s going wrong in retail banking to make consumers so negative? Our work over recent years shows there’s clearly a need for greater transparency about costs and charging structures so that consumers can shop around. The Consumer Panel is also concerned by the incentives for staff to promote certain products or accounts which might not be in the best interests of the customer.

The list of issues about which consumers complain is even more extensive. These include opaque interest rates on older accounts, a lack of real choice with accounts between providers, “bait pricing” and the inappropriate use of the right of set-off by some institutions.

These are grave enough, but the complaints which generate the most concern are about the size of charges levied by banks for unauthorised overdrafts. These cause real harm to consumers and, in some cases, have resulted in spiralling interest and charges for what often started out as a very small overspend.

How can the banking industry put its house in order and win back customer trust? This summer, the Panel launched its ten-point plan for reform. Six of the points are directed at the industry and four at the regulators. Key amongst those for the industry is the call for straightforward products “which do what they say on the tin”.

We think that many of the present ills of the system could be remedied by having products which are easier for consumers to understand and to compare with other products. Taking this to its logical conclusion, we think it’s time for the retail banking industry to learn from mobile phone providers. Portable bank account numbers would make it much easier for consumers to switch bank accounts.

The notion of portable account numbers might seem radical to some, however, we’d also like to see a change in the current business model deployed by most High Street banks of penalising the unwary, unlucky or unprepared through overdraft charges and other mechanisms. It means that, for most customers most of the time, banks can offer apparently “free” bank accounts, it’s a service that’s paid for by disproportionate charges on others.

To be fair, there are those in the industry who recognise the drawbacks of this arrangement. There is also the fear that the first organisation to break the conventional business model, charging all customers upfront, however little, for banking services, will be penalised by the market.

But, if banks are going to become trusted as retail organisations, they are going to have to become more open and transparent about the services they offer and the way these services are paid for by consumers. 

* You can read the report at:
http://www.fs-cp.org.uk/publications/pdf/ fsa_fairness_report.pdf

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