The Great Account Migration: Lessons from Behavioural Economics

The forced migration of over 1 million current and deposit accounts from two exiting banks in Ireland represents a significant challenge for consumers and the Irish retail banking system. In this Note, we examine potential barriers to timely consumer engagement from a behavioural economics perspective, which should be considered by the retail banks in their engagement with customers to encourage and support them effectively through the process. Evidence shows that consumer inertia is pervasive and deeply entrenched across financial product markets, even where the financial incentive to switch providers appears to be overwhelming. It is also clear that particular groups can be more at risk from the costs of inaction. This includes consumers with pre-existing sources of vulnerability, such as lower income and education, as well as customers with a long history with one bank, or who are distrustful of financial institutions. Some of these groups also appear to be more inert based on recent Irish survey data. As part of their package of measures to support affected consumers, we outline some approaches that financial institutions can use to try to encourage consumer engagement - framing customer notifications to convey urgency, setting out clearly the steps a customer needs to follow to take action, and making the consumer experience as frictionless as possible, but emphasise that there is no ‘silver bullet’ to entirely overcome the risk of consumer inaction. The forced migration of such a large volume of customer accounts is unprecedented in the Irish market. Critically, consumers are not choosing to switch, they are being forced to do so and this could create a significant challenge for consumers if not effectively managed by the exiting and remaining banks. As such, it is incumbent on financial institutions (including banks, direct debt originators etc.) to do all they can to support their consumers through the process, drawing on all available research and resources.