Misconception that switching banks is difficult

Misconception that switching banks is difficult

Switching banks is easier than people think, says Dr Claire Matthews, who researched the issue for her Doctor of Philosophy in Banking Studies.

The PhD was conferred at graduation in Palmerston North recently.

Dr Matthews is a senior lecturer in the Centre for Banking Studies who worked in the banking industry for 12 years before joining the University in 1996.

Her research examined the financial and non-financial costs of switching banks and included survey of nearly 3000 New Zealanders, with questions about their banking relationship and their views on switching.

Dr Matthews some of the information she found was unexpected and could result in better customer service. “As well as looking at the financial cost of switching, I looked at the relational and procedural costs," she says. "Interestingly, people’s perceptions were that the financial cost of switching banks was high when in fact it is not because the new bank often waives fees or contributes to legal costs to get new customers."

Yet people's perceptions seem to be ingrained, she says. "Even those who had changed recently and had a good experience thought that was a one-off and that it would be more difficult next time.”

The other aspect of changing banks that people did not like was the hassle – paperwork, changing account numbers and getting used to different online banking systems.

She makes recommendations on how banks could address this to gain a competitive edge, including the possibility of account number portability, as is now required for cellphone service providers. She suspects the banks may need to be forced to agree to it by the Commerce Commission though.

“It would make life easier for the customer, but for banks it could be a double-edged sword because not only would it make it easier for new customers to transfer to their bank, but easier for current customers leave to go to another bank."

Caption: Dr Claire Matthews.

ENDS

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