The Office of Fair Trading (OFT) says that the majority of banking customers are not aware of the charges and interest rates paid on their current account and are therefore unaware if they are receiving a good deal from their bank, leading to an uncompetitive market. As a result, just six percent of consumers changed their current account in the last year, the OFT claims. However, it may be that the majority of customers are simply happy with their bank and see no reason to change.

OFT’s claim that the availability of information is poor is contestable. Banks do not hide information about insufficient-funds charges from their customers and rates of interest are often the central feature of advertisements for retail banks. It might actually be suggested that consumers consider their own banking habits and pick a current account with this information in mind.

It can also be argued that a current account is essentially a commoditized product. Consumers generally use a current account as a working account into which their salary is paid and from which payments are made. If consumers want an account that pays interest, then a savings account would be a better choice.

While the OFT is concerned that only six percent of consumers have changed banks over the last year, new research reveals that 91% of consumers were either ‘satisfied’ or ‘very satisfied’ with their bank. So it is not a case of consumers being displeased with the services that are available. Current accounts are by nature basic products, so if they fulfill a basic requirement then most consumers will be happy.

The OFT does, however, make a good point about the more vulnerable banking customers being hit hardest in terms of charges. Effectively this means that the poorest people, who might often inadvertently become overdrawn on their current account, subsidize the wealthier ones who do not have the same problems with account management. However, this is a separate issue, which does need to be addressed, but a return to up-front charging for basic banking products is unlikely to be the solution. Annual fees for basic services can actually exclude people from gaining access to banking services altogether.

Further reading: Banking Market Research