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Over 14 million UK current account holders may switch bank accounts under Vickers reforms

Banks have less than 12 months to improve or customers could switch, according to SAS

22 October 2012 - New research indicates that 14.1 million high street bank customers may be more likely to switch providers if it was easier to do so, with new legislation set to transform the retail banking market. This is the key finding of a detailed investigation into customer service in banking released today by SAS, following independent research and analysis by YouGov, Henley Business School and Ovum.

Almost one third (29 per cent) of UK high street bank customers said that if the process of moving their primary current account was made easier, they would be very or fairly likely to change their main current account provider , according to an online YouGov survey of consumers commissioned by SAS, the leader in  business analytics software and services. Under new legislation, the switching of customer accounts and redirecting of direct debits will reduce from 31 days to just seven, as recommended by the Vickers report. With the ruling coming into effect in September 2013, banks are under significant pressure to improve customer service levels in less than 12 months, and therefore must enhance their ability to intelligently manage the customer experience.

According to the poll, 38 per cent of high street bank consumers have never switched their main current account and 65 per cent believe banks are failing to improve customer service. The data suggests that despite a high level of dissatisfaction, consumer apathy remains prevalent.

Banks have been slow to improve their use of data and understand customer behaviour due to other pressures that are being given priority. A separate survey of European banks, conducted by industry analysts from the financial services team at Ovum and commissioned by SAS, reveals that banks are currently focused on meeting regulatory demands as opposed to customer service. This is diverting management attention and project priorities despite a desire to deliver on customer promises. The irony, according to the Ovum study, is that many of the pain-points in addressing compliance are common with those in customer experience, and solutions could be leveraged to meet both objectives.

This view is supported by the Henley Business School, which finds that there is a desire to widen the use of customer data. However, very few companies have the core IT systems to tackle the big data challenge that they face, as supporting the post financial crisis business strategy takes precedence.

Both the research from Henley Business School and Ovum find that in order to improve customer service banks need to undergo a culture change, replacing a focus on product-led selling with a focus on providing the services that customers demand. The studies contend that banks can improve their understanding of consumers and service them with relevant products and services by harnessing the data already in their possession.

Barrie Neill, retail banking consultant, SAS UK & Ireland, comments: "Consumer churn rates for retail banks have traditionally been in the range of 2-3 per cent; this is set to change as new legislation transforms retail banking into a competitive industry, akin to telecoms or retail. Banks are sitting on a rich history of data about customers but continually struggle to harness this data to provide services and products relevant to each customer. The simple solution to this is Big Data Analytics, which will integrate their customer database with transactional product systems, providing the banks with a clear view on the most appropriate and timely services for their customers. The YouGov survey found 36 per cent of high street bank consumers would be very or fairly likely to provide more personal data to banks if they improved the service they received. Only by harnessing this data correctly can banks gain greater insight, improve service levels and cross-sell more effectively."

Professor Moira Clark, Henley Business School, says: "The real problems that banks have in order to achieve a sound picture of their customers are rooted in integrating customer service and product data into one manageable database. Banks need to develop a sound IT investment programme to bring IT infrastructure up to capability to meet consumer demands. There is a significant opportunity for banks to improve customer service and maintain low churn levels but this requires a paradigm culture shift. Once account switching reforms are introduced the bank that adopts a customer-centric focus will be the one that benefits the most."

Daniel Mayo, Practice Leader, Financial Services Technology, Ovum comments: "We believe that most UK banks will fall short of their renewed plans to provide a strong customer experience, due to the fact that they are too focussed on a wide scope of regulatory concerns. Compliance pressures are distracting banks, and this is affecting their ability to cross-sell and market. As the new account-switching legislation comes into force, it will be those institutions that are prepared for a highly competitive market that will thrive."

Notes to editors:

All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,114 adults. Fieldwork was undertaken between 12th and 14th September 2012. The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).

If you would like to read the whitepaper 'Financial Services: The Single Customer View, a review of the current status' from Henley Business School you can download the report from here.

If you would like to read the whitepaper 'Can UK banks deliver on their customer experience promises? Dealing with the data issue' from Ovum you can download the report from here.

About SAS

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