No one will argue that the long period of a low base interest rate from the Bank of England has flattened the savings market, and made it harder for banks and building societies to differentiate on price. With the Bank Rate forecast to remain as it is for the next 3 years (Bank of England Monetary Policy Report, November 2019), the situation is unlikely to change without at least a ‘firm nudge’ from the regulator. As the FCA’s consultation period commences, financial service providers need to think beyond how the proposals may impact any perceived competitive advantage that consumer apathy currently offers, and look at both the impact and the opportunities that change could bring to their customer engagement channels.
As they stand, these proposals will require easy access cash savings and ISA accounts to be presented with both a long term guaranteed interest rate, as well as any introductory ‘special offer’ rates that may apply for up to the first 12 months. This is very different from today’s world of more attractive headline rate advertisement that may later drop into zombie account status.
When it comes to customer engagement, there are a number of areas that may be affected. For one thing, the proposed changes are likely to impact the attractiveness of AER calculations currently used by consumers for comparison purposes. For another, having to show two rates (where there is an introductory offer rate) while maintaining the current high standard of clarity will be a challenge.
Where the FCAs proposal offers real opportunity is in the role of the digital engagement channel. Rather than hoping to hang on to existing customers who drop away from their introductory rate by being quiet about it, providers can use these changes to engage proactively through their app and online channel. They can help customers better plan their savings goals, and nudge customers who may be tempted to go elsewhere with newer offers that entice them to stay.
We see an opportunity for banks and building societies who believe in long term relationships with their customers and members, and we encourage and help them to take advantage of the opportunities that better customer engagement can deliver.