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Column Why don’t we switch banks, just like other services?

We switch phone, car insurance, and utility providers if we spot a better deal somewhere else – but just one in four of us has ever changed bank accounts. Do the banks really deserve such loyalty? asks Michael Dowling.

A FAMILY WILL pay €260 in bank charges to have their account with the traditional high fee banks next year. Our compatriots up North get a different deal. They get the same current account from the same Irish banks, but won’t pay a penny in fees.

Welcome to a basic lesson in competition. If you have two banks dominating the market you get charged high fees, and if you have a highly competitive market, like in Northern Ireland, you get innovative, good value services.

The bankers need our help more than ever today, though. They need us to agree to pay that €260 and not switch to a free banking account. Now, they’ll allow us a mild grumble, a bit of self-muttering upon reading the bank statement, and outraged comments below – just don’t try anything stupid like actually doing something about it please.

An unhealthy banking market? You don’t say…

A big problem here is us. We let the banks walk all over us. What’s strange is the contrast with our excellent behaviour in our other household bills.

Take phone bills for example. We have forced massive improvements in mobile phone services through our extreme disloyalty to providers. Show us the newest shiniest phone and we’ll switch in a second to whatever company is offering that phone. Without even so much as a thought to using our new free calling minutes to say goodbye to the previous provider.

It doesn’t matter how many stupid ads we are shown with people clutching their phones and dancing around the streets such is their apparent Gaiety-School-of-Acting delight with their phone service – we just have no loyalty. Witness the rise firstly of Meteor, then Three, and more recently Tesco Mobile and the multitude of other new entrants.

If you’re a phone company in this market you live in a state of constant terror. There is an absolute fear of losing everything if the company doesn’t innovate and offer a good deal. This is the environment within which better service thrives.

Compare that to the market for bank account switching. Take an average four people you might see this week shivering at an ATM to take out their cash. Three of four of them are still with the same bank they opened as teenagers or with their first pay cheque. One in four of those queuing actively dislikes the bank he or she is with but hasn’t changed. Just one in four has ever changed their bank account.

Hello profit! Hello #banking260! How could you not charge high fees in a market like this? Your customers actively dislike you and yet will continue to stick with you no matter what amount of fees you charge? This is corporate nirvana. Imagine the envy of the phone companies when they see this type of behaviour?

The rise of the Power Switchers

There is a fly in the ointment of banking inertia though. There’s a group of us who are Power Switchers – people who turn switching into an art form. Car insurance firms, electricity, phones, broadband provider executives are sent on corporate retreats to curse, ponder, and tremble at the problem of the Power Switchers.

A recent index on switching, compiled for Permanent TSB, tracks switching behaviour across all the common household bills including banking.

The main findings are not too surprising. People switch the bills that are easiest to switch, so car insurance and mobile are tops. Electricity lags a bit behind presumably because the new, extremely straightforward switching system is not yet widely known. Broadband still irritates people. And banking is bottom of the list.

Most people who switch, including in banking, report being happy with the outcome. Bank switchers in particular actually report it as being almost an empowering experience (well, whatever gets you up in the morning).

The process is also far less hassle than people envisage. There’s a bit of gym-psychology going on here – we tend to view going to the gym as a sacrifice that’s not going to be fun, but once we get there we enjoy the experience a lot more than we thought and are happy we went.

Developing a switching habit

It’s the Power Switchers who are particularly interesting. These are the under-35s, living in Dublin usually, and they have a switching habit. Evidence from other countries suggests they are wealthier and more educated. They switch multiple providers each year and they’ve even *gasp* switched their bank account. Before now the bank account wasn’t even on the radar as there were no charges, but now that it has become a bill it is dispassionately added to the switching habit. And it’s a growing number – one third of all bank account switching occurred in the last year (10 per cent last year vs 29 per cent who have ever switched).

A standard approach of the Power Switcher is to pick a day a year when they sit down and ponder the necessity and amount of each of their bills. Then they threaten their existing providers with desertion unless their bills are lowered, and promptly leave the providers who don’t comply.

These are the people who got us all to switch to their phone network so we could call each other for free. They’re the people who got us to stop using Internet Explorer by laughing at us. Next they’ll be mocking us for paying bank fees when there is free banking available.

These are a dangerous bunch of renegades who threaten the very fabric of #banking260. The banks might have to improve services and reduce fees if this crowd get traction. So, this is a call for action. We all want €260 in bank charges. But the power switchers might ruin all this with their disloyal actions. Please RT #banking260 today to show your appreciation for high fees.

Dr Michael Dowling is Lecturer in Finance in Dublin City University specialising in personal finance and investor psychology. He tweets @MichaelMDowling

Read: Credit Unions are “safe, strong and secure” – ILCU chief

Read: AIB and Irish Mortgage Holders Organisation to establish third-party advice body

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56 Comments
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    Mute Brian Ward
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    Mar 4th 2017, 7:30 AM

    The irony is that we had a tram system in Cork just like Dublin years ago but both systems were ripped up to make way for cars. Now we can look at the old lines that have either fallen into disregard or turned into walkways from our cars stuck in a traffic jam.

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    Mute Mr Snuffleupagus
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    Mar 4th 2017, 7:49 AM

    @Brian Ward: And a very good system it was. We could also do with more small car ferries as the Cobh to Passage West one has been a real success. I think it would open up parts of East Cork that are just too far out to commute to the city otherwise, to housebuyers and help relieve pressure on first time buyers and renters.

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    Mute Fred Jensen
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    Mar 4th 2017, 9:19 AM

    @Brian Ward:

    Indeed, isn’t there still a visible rail line that goes all the way down to the Point in Dublin along the quays. They didn’t even bother removing it when cars were all the rage. Yet how many hundreds of millions did they spend extending the luas down to the Point.

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    Mute Mark Hosford
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    Mar 4th 2017, 1:41 PM

    The cork tram system was ripped up in the 30s largely for economic reasons … Dublin was more vanity …

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    Mute Chris Mansfield
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    Mar 4th 2017, 8:13 AM

    The population argument is really the wrong way around. Population density follows public transport infrastructure. It’s not that you should have density before you get the transport.

    Something to consider. In the 1970s, the density in Cork and Dublin was very similar. Since then, Dublin’s has increased, while Cork’s has decreased. Why? Because Dublin has seen investment in quality public transport (DART, Luas), while Cork has been forced to rely on the car, which means stretched out suburbs. Just look at what has been built along the Luas lines and you’ll see this effect.

    If we try to increase density without having the public transport in place first, we’ll just get people who are car dependent and won’t change, and we’ll encourage congestion, plus a belief that giving up the road space will make the congestion worse.

    The public transport needs to come first.

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    Mute Sean @114
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    Mar 4th 2017, 9:20 AM

    But surely you cannot justify spending billions on a light rail system for a city population of 120,000 while you then wait for the workers to arrive. Where’s the demand? That’s Jackie Healy Rae logic.

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    Mute Fred Jensen
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    Mar 4th 2017, 9:20 AM

    @Chris Mansfield:

    You are absolutely correct, yet all Irish planners and politicians think in exactly the opposite way. They think public transport should be “provided” to where people are already living.

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    Mute Sean @114
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    Mar 4th 2017, 9:22 AM

    Of course it’s supply and demand. Do something different and you end up in a Bus Eireann situation.

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    Mute Emeralds
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    Mar 4th 2017, 9:27 AM

    Billions?

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    Mute Tony Skillington
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    Mar 4th 2017, 9:47 AM

    540,000 actually Sean.

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    Mute Fred Jensen
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    Mar 4th 2017, 9:56 AM

    @Sean @114:

    Sean bus lines should be provided for where people are already living. Rail lines however should be put in place in advance of development. It becomes much easier to get planning permission if there’s a rail link, so it’s a case of build it and they will come.

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    Mute Sean @114
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    Mar 4th 2017, 10:49 AM

    And you believe that 540K. The new children’s hospital was going to cost €260m initially. Now it’s over a billion!!!! Treble whatever figure is thrown out there.

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    Mute Ashling Fenton
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    Mar 4th 2017, 12:10 PM

    There still needs to be a minimum density to ensure revenue .

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    Mute John R
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    Mar 4th 2017, 1:47 PM

    Chris you say in the 1970s the density of Dublin and Cork was similar and based on this premise build an entire argument for light rail in Cork. on that. The problem is that your premise is untrue. Dublin has always had a far larger population than Cork city. If you think that the only reason Dublin has grown faster than Cork is public transport then you haven’t been to Dublin and don’t know the economics of cities. Dublin is a capital city. Cork is a small city. It has neither the population or the density for light rail. Other solutions will have to be found.

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    Mute Talleyrand Frye
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    Mar 4th 2017, 4:20 PM

    @John R: Population size and population density are not the same thing. Ireland has a larger population than San Marino, but San Marino has greater population density than Ireland.

    I am not saying Chris is right or wrong – but you at least need to understand exactly what he is saying before you can critique his points.

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    Mute Tony Skillington
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    Mar 4th 2017, 5:51 PM

    Sean…wake up. 540,000 is the population of Cork…not the 120,000 you stated.

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    Mute Buster VL
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    Mar 4th 2017, 9:30 PM

    Metrland.

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    Mute Conchuir
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    Mar 5th 2017, 9:04 AM

    Yeah Tony that’s the entire county not the city

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    Mute John R
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    Mar 5th 2017, 12:47 PM

    Talleyrand you’re correct but it’s irrelevant in this case. You can have population density but lack the size of population necessary to make rail a realistic population. Dublin has that population but barely the scale as the city it too spread out. Cork city has neither the population nor the scale. Politicians make many promises most based on populism. Light rail is very expensive both to build and to run. The construction requires a massive state subvention. The operational costs in the case of the Dublin Luas are met by the users. In the case of Cork it is likely that the user base would be far less for any given line. Hence an operational subsidy would be needed.

    The argument that just because Dublin has it Cork should as well is just the politics of envy not reason.

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    Mute Donal Martin
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    Mar 4th 2017, 7:24 AM

    Nobody cares about outside Dublin, that’s what

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    Mute Brian Ward
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    Mar 4th 2017, 7:32 AM

    Exactly Donal, whatever happened to the “Dart to Dingle”?

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    Mute Alan Scott
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    Mar 4th 2017, 8:27 AM

    A lot of the streets are very narrow but we love the Cork people

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    Mute Tony Skillington
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    Mar 4th 2017, 9:53 AM

    @Alan. For the most part a LUAS type system would service the suburbs..the wider streets such as Patrick Street, South Mall, Grand Parade and Parnell Place would be well able to accommodate it. Given that Cork has such a high density of FDI with the pharmaceutical industry in particular, this would benefit the movement of people hugely from places like Ring as kiddy and Little Island the latter which suffers from enormous traffic congestion, so much so businesses there are staggering their staffs finishing times to allow them get home at a reasonable hour. It makes nothing but good sense to have a system like this here albeit on a smaller scale that Dublin. Ohhhhh…and we love ye too.

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    Mute Don O Sullivan
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    Mar 4th 2017, 7:32 AM

    I remember rail tracks in the 70s and early 80s that ran from Kent Station up towards City Hall over Brian Boru Bridge.These were used a lot by freight trains transporting grain and fertiliser at the time to and from the docks.Its such a shame that they were covered over and were not extended to other parts of the city and parts of the county.In actual fact a rail system ran from Skibereen right in towards Waterfall also which was allowed go ruin and never preserved.Its such a shame.I’d prefer the thoughts of having a tram type system that operates in our twinned city San Francisco.

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    Mute prop joe
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    Mar 4th 2017, 7:33 AM

    There are old railway lines that can be used but critical junctions have been sold off in Cork city. An East West line would make sense joining the courthouse , ucc bons hospital, cuh , model road industrial park, cit. But this will never happen. So it’s the bus or cycle if you don’t want to drive.

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    Mute Adrian
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    Mar 4th 2017, 7:35 AM

    So in summary. The politicians bankrupt the country and population didn’t seem to be the problem before the economic crash but it’s the excuse now because they can’t afford it now basically.

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    Mute Stephen Devlin
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    Mar 4th 2017, 8:42 AM

    But certain amenities like wage rises and water meters there is plenty money for

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    Mute rockmast
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    Mar 4th 2017, 10:53 AM

    A small monorail would probably work better in Cork than a luas tram line. A lot of the cost of building the luas was buying land off people along the line. A stoneworks in Dundrum got around 5 million while an acre at the edge of Sandyford cost 12 million. Put it up in the air on stilts.

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    Mute Eugene Conroy
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    Mar 4th 2017, 10:07 AM

    Should read “What happened to Cork”

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    Mute phil o c
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    Mar 4th 2017, 11:01 AM

    What do you mean by that Eugene?

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    Mute David
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    Mar 4th 2017, 11:59 AM

    Well the it’s the Peoples Republic of Cork so pay for it yourselves lol

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    Mute David MC
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    Mar 4th 2017, 1:09 PM

    @David: Cork accounts for one third of the total economic output of the country so we could well afford it …

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    Mute John R
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    Mar 5th 2017, 1:00 PM

    David “Cork accounts for one third if the total economic output of the country”! Seriously? So Cork city and county with a population of 529,000 people out of a national population of 4.7 million people accounts for 33% of economic output even though it has only 11% of the population. Seriously amazing. I am in awe. Poor Dublin with a population of 1.35 million only accounts for another 42% of GDP. So based on your estimate Dublin and Cork and accounts for 77% of the entire economic output of the Republic despite having less than half the population. Moreover Cork is incomparably wealthier than Dublin.

    I suggest that your statement about Cork economic output is wrong. Very wrong.

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    Mute David MC
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    Mar 4th 2017, 1:08 PM

    The LUTS plan for Cork going back to the late 70s had a light rail system in the project but never was acted on due to the cost , a smaller city like Cork can benefit from these types of transport platforms better than already built up cities like Dublin as it helps the city grow and you can add to them as the city grows they also help with economic advancement , why wait until it has to be justified , justify it on the basis of helping the city grow and then it will pay for its self down the line ..

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    Mute HoneyBadger617
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    Mar 4th 2017, 9:29 AM

    It got lost on its way down and now it’s the Dublin cross city link. See it’s simple when you know the truth.

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    Mute Kieran Mcnamee
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    Mar 4th 2017, 8:23 AM

    Why ?

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    Mute mcgoo
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    Mar 4th 2017, 1:53 PM

    Taking Dublins system as an example, A green line would run through the leafy suburbs of ballintemple and Douglas. A red line would take in ballyvolane and knocknaheeny.

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    Mute David
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    Mar 4th 2017, 11:58 AM

    It’s Cork lol

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    Mute David MC
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    Mar 4th 2017, 1:10 PM

    @David: Aw another person with an attitude about Cork when projects are talked about the biggest county in the country
    and a population of 500,000 thousand people ..

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    Mute Buster VL
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    Mar 4th 2017, 9:28 PM

    Don’t even think about a luas for cork. AAA Wally would recommend a starting salary of half a million P.a. for tram drivers.

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