Nationwide reports rise in UK account switching – but critics remain unconvinced
Nationwide has reported a significant increase in the number of customers switching their main current account to the building society, following the introduction of the seven day account switching service on 16 September – but not everyone is convinced.
According to the building society’s figures, the number of account switches increased 79%. While the firm refused to confirm absolute numbers, its 2013 annual report showed that it was gaining approximately 6,670 new customers per week, of which around a third were using Nationwide as their main account.
“The new Current Account Switch Service is making it even easier for people to move their accounts to Nationwide and as awareness and confidence increases in the new service we expect even more people to follow suit,” said Phil Smith, head of current accounts at Nationwide. “If you are unhappy with the service you are receiving, or the terms of your current account, there has never been a better time to switch.”
Rival Metro Bank, which is set to open four new stores in the south of England before the end of the year, would not confirm how many customers it had gained since the switching service went live but promised it would release figures before the end of next month. Metro Bank had laid on extra full-time staff for the onset of the new service, in anticipation of more new customers. The service is intended to help drive up competition in the UK retail banking sector, and obliges banks to switch a customer’s standing orders and direct debits over within a maximum of seven working days, and to refund in full any costs arising from any mistakes.
Before the 16 September, estimates had varied widely as to how much difference the new service, introduced by the UK Payments Council, would actually make. According to research puplished in early September by YouGov, funded by SAS, about five million UK current account holders are expected to switch their bank in the next 12 months. However, another estimate from Intelligent Environments suggested that as many as a third of UK consumers were poised to switch immediately – a number that the firm estimates at 13.8 million, based on just under 30% of the UK’s 46 million account holders.
It is also unclear whether the rise is due to the account switching service specifically, or whether it would have happened anyway. According to Nationwide, switchers doubled (195.6%) between the financial years 2009/10 and 2010/11, quadrupled (382.7%) between the financial years 2009/10 and 2011/12 and increased six-fold (599.5%) between the financial years 2009/10 and 2012/13. Some industry observers remain sceptical about the impact of the new rules – and whether customers would actually stay with their new provider for any length of time, after making an initial switch.
“I’m not anticipating account switching to have anywhere near the effect [its advocates] suggest, but for sure there will be a smallish proportion of customers who will swap providers,” said Alex Kwiatkowsky, research manager EMEA at IDC Financial Insights. “Whether they stay in their new ‘home’, or flit between providers – akin to the same behaviour witnessed in credit cards where users chase 0% APR by continuing to make balance transfers – remains to be seen.”
Nationwide has 15 million members in total.