Switching banks is easier than you think

Jenha White

Monday 7th December 2009

A common misconception of switching banks is that the process is an expensive hassle, however research shows this is far from the truth.

Dr Claire Matthews looked at the financial and non-financial costs of switching banks for her Doctor of Philosophy in Banking Studies at Massey University.

"Switching banks is easier than people think," she says.

Her research included a survey of nearly 3,000 New Zealanders, with questions about their banking relationships and their views on switching.

She found 4 - 5% of customers switch banks on an annual basis.

There were a further 20% of customers that would like to switch banks but they were deterred by the perceived problems and issues associated with switching.

"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."

She says her most suprising finding was that even people who had recently changed banks and had a good experience thought it was a one-off and expected it would be more difficult next time.

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

Matthews has made recommendations on how banks could address switching issues to gain a competitive edge, including the possibility of account number portability, as is now required for cellphone service providers.

She says this would be a regulatory issue for the Commerce Commission.

"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."

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