Adams, P. et al.Attention, search and switching: Evidence on mandated disclosure from the savings market

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Paul Adams, Stefan Hunt, Christopher Palmer & Redis Zaliauskas

Release date:
July 2016

Financial Conduct Authority (FCA), Occasional Paper 19

To inform possible future policy in the UK savings market, the authors test new consumer disclosure. Easy access savings accounts are the most popular and simplest way to save in the UK, with the main product feature being the interest rate. While significant rate differences exist on similar accounts both within and across providers, the majority of consumers rarely switch and so miss out on interest earnings.

The new disclosure proposals were designed to help consumers identify better products and stimulate competition between firms. The authors test their effectiveness using field trials involving five regulated firms and 130,000 consumers. Consumers in the trials were either about to experience a decrease in their interest rate, or were on a rate lower than available on currently offered products. Three interventions are tested: information about comparable higher-rate-paying products, a pre-filled return form that enabled simplified switching and a reminder about the rate decrease.

They authors find that front-page information about higher available rates led to an increase in switching from a baseline of 3% to 6% of consumers, while non-front-page disclosures had no effect. On a different sample of consumers, a pre-filled return form increased switching from a similar baseline of 3% to 12%. Reminders, especially those sent close to a rate decrease date, prompted an 8-9 percentage point increase in switching − comparable to the effects of the return form, albeit from a higher baseline level. All interventions increased switching within providers, but not to higher-paying products available from other firms. Despite switching within providers in the trials taking 15 minutes on average, according to a survey, and switching gains being non-trivial - £127 in the first year on average - the authors find that attention to disclosure is limited. This may explain the modest impact of most of the changes to disclosure trialled.

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