When banking fees actually improve satisfaction
The proportion of Britons with a packaged or fee-paying bank account has surged to 17% (from 5% in 1998), placing these types of accounts among the UK's fastest-growing financial products, according to figures published by MORI Financial Services. Banking strategy consultancy, Cims, suggests that the growth trend is due to higher customer satisfaction levels with such account types.
According to Cims, the 'end of free banking' feared by some industry commentators has actually ushered in higher levels of customer satisfaction and higher use of bank services.
Packaged account holders are also more likely to have opened an account because of a personal recommendation from a friend, colleague, or family member than those who have recently opened a traditional, no-frills account. (For the latter group, the main reason for opening an account with a particular bank is simply that their parents banked there.)
Paid loyalty Furthermore, Cims says, consumers who use added-value accounts show consistently higher levels of satisfaction. David Steele, Cims' head of client management for the UK, explained: "We have found that if you design accounts offering extras that customers want and need, they are prepared to pay a small monthly fee and are more loyal to their bank as a result."
The key findings of the MORI research include:
- The proportion of UK current account holders (e.g. cheque accounts) who have a packaged account increased from 5% in 1998 to 17% by the end of 2002. And in Scotland, during the same period, this proportion rose from 5% to 19%.
- Despite paying a fee, packaged account holders are more likely to be "very satisfied" with their account than those with a standard account (51% against 47%).
- Some 35% of packaged account holders opened one because it was recommended to them, compared to 26% of standard account holders. The key reason for no-frills account holders to open an account was "because their parents banked there" (28%). This reason for the selection of their primary bank applied, however, to only 15% of packaged account holders.
- Packaged account holders are nearly twice as likely (17%) to have made a purchase following the receipt of direct mail in the past 12 months, compared to 9% of standard current account holders.
- Those with packaged accounts are also more likely (37%) to have found direct mail to be a useful source of information than their standard account counterparts (32%).
"While we wouldn't claim that packaged accounts are perfect for all banking customers, what this shows is that they can open the door to higher satisfaction for customers, coupled with greater profitability for banks," concluded Steele.