Mobility of bank customers in the EU: Much ado about little

Direct banks and the ever rising availability of price-comparison websites and online credit intermediaries enable customers to choose the most attractive provider with minimal effort. Moreover, the general openness of national markets to competitors from other EU member states raises competitive pressure further. !" #$$because it is of the opinion that artificial barriers prevent customers from switching from one bank to another. It cites low customer mobility as evidence of the perceived obstacles to switching. Even so, the financial industry submitted a list of proposals dedicated to the further fostering of customer mobility by June 2008 – as requested by the Commission. At the same time, the Commission circulated a draft regulation. ()! $ #$$$!On a self-regulatory basis, the financial industry pledged to henceforth offer customers a far-reaching account switching service. problem is not low customer mobility in national markets, but low cross-border account mobility.Here, indeed, there is need for Commission action so that one day opening a bank account abroad and transferring banking business to another country will pose as few problems as switching from one bank to another in the national context today. The current debate about the mobility of retail banking customers results from a sector inquiry the Commission initiated in 2005. According to the final report (released in January 2007), there is not enough competition in the European retail banking markets. As evidence for this, the Commission points to the fact that indicators such as profit margins, prices and selling patterns vary significantly between EU member states, whereas the same indicators are found to converge within individual member states. Additionally, the sector inquiry diagnoses low customer mobility, both within member states and across national borders. Differences in prices and policies as well as low customer mobility result, in the Com-mission's opinion, from perceived obstacles like information asymmetries and the high cost of switching. For example, the latter comprises the administrative burden of switching and artificial barriers like tying banking products to others or imposing high closing charges. Against this background, the Commission appointed an expert group in order to explore " customer mobility in relation to bank accounts " in more detail. The expert group released its final report in May 2007. To the extent that obstacles and solutions are the same or similar as for current accounts, the sector inquiry also focuses on two more product categories: first, payment facilities attached to current accounts, whereby …