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The majority of Irish consumers are missing out on saving money on financial products by not shopping around to compare deals. That’s according to a new study released today by the Economic and Social Research Institute’s (ESRI’s Behavioural Research Unit (BRU).
From surveying 3,000 Irish consumers, the ESRI found that people rely on personal recommendations or a bank they already use when applying for bank accounts, credit cards, loans or mortgages. However, better value products are usually available elsewhere.
The research was commissioned by the Department of Finance, and provides an in-depth account of consumer behaviour in retail financial services. It found that an average of 65% of consumers did not compare deals when selecting financial products; When choosing a bank account, 73% of consumers didn’t shop around, while this figure rose to 74% for credit cards.
Meanwhile, 68% of national consumers did not shop around for loans. 46% of consumers did not compare offers when getting a mortgage, even though differences in interest payments can add up to tens of thousands of euros.
“Once consumers have these financial products, the majority do not consider switching to better value ones. Switching rates across the four products ranged from 6-17% over five years. Most people are aware that switching is an option but cite difficulty comparing offers, costs, time, uncertainty about the process and worries about making a mistake,” the ESRI said.
However, it said that shopping around “appears to be a habit” among certain consumers. The ESRI added that the same consumers who do compare offers when initially purchasing financial products are also more likely to switch in future. The main motive of doing so was simply to save money, rather than to access new features or a better service.
Head of BRU, Professor Pete Lunn, said that consumers should be aware of the savings they could make by searching for better value.
“Consumers could make substantial gains by choosing better value financial products, but many feel unable to do so,” Professor Lunn said.
“In the next stage of this research programme, we are using the study findings to design digital tools to help people to understand the market better and to feel confident enough to shop around for better deals,” he added.
Meanwhile, commenting on the new findings, Minister for Finance, Michael McGrath TD said he hoped the findings would “encourage” consumers to shop around:
“The findings of this report are clear, consumers can make considerable savings by actively comparing a range of commonly used financial products,” he said.
“Given recent interest rate increases, mortgage holders in particular have a strong incentive to look at potentially better value options and I hope the findings will encourage many to do so,” he added.
“The report gives a very useful insight into the reasons why some people stick with existing financial product providers despite the potential savings which switching offers. Financial institutions have a duty to make costs and features of their products clear and accessible. As Minister for Finance I will be giving my full support to measures that can be undertaken to make the switching process as attractive and seamless for consumers as possible.”
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