BACS admits disappointment as UK current account switching stalls
More than a million people switched their current account to a rival bank in the year leading up to July 2015, according to new figures published by UK payments system BACS. The numbers represent only a minimal increase on the year before – undermining hopes that making switching easier would lead to dramatic improvements in the competitiveness of UK retail banks.
In September 2013, the UK Payments Council introduced the Current Account Switch Service, which guarantees an account switch within seven working days. The idea was to make switching banks easier, thereby encouraging consumers to try out the market and encouraging competition, which in turn was expected to drive up service.
The latest figures from BACS show that in the 12-month period from 1 July 2014 to 30 June 2015 there were 1.10 million switches, versus 1.06 million switches in the same time period one year before. By the end of June 2015, 69% of people in the UK were aware of the Current Account Switch Service – which is up from 58% in the month it was launched (September 2013) but still some way short of the 75% target that was initially hoped for. BACS took over the switching service from the now-defunct UK Payments Council in March.
“While we only took over responsibility for delivering against these targets in March of this year, we are a little disappointed with the latest figures and we are working with our participating banks and building societies to ensure that the current account switch service and its guarantee are highly visible within the high-profile press and TV advertising campaigns they use to promote their current account offerings,” said BACS in an official statement.
There have been 2.02 million switches since launch. A switch is defined as the process by which a customer migrates their account from one bank to another – but for a complete switch, they must also close the old account. Switches where a customer simply moves their salary over to a new bank but never gets round to closing their old account are not included in the figures.
While TNS, which runs a detailed tally of which banks UK account holders switched to and from, has not yet published a full breakdown of the figures, previous reports have suggested a divide between banks such as HSBC and RBS, which have been losing customers, and financial institutions such as Santander and Nationwide Building Society, which have both consistently gained customers.
“The biggest winners are banks that offer current accounts paying competitive rates of interest – such as Santander’s 123 account or Nationwide’s FlexDirect – and offer a real alternative to the struggling savings account market,” said Nicolas Frankcom, money expert at price comparison service uSwitch.com. “Consumers are realising that a bank account doesn’t have to be for life, and that switching can be a simple way to boost their balance. In fact, there are plenty of competitive offers on the market if you look even further afield to the new challenger banks such as Tesco Bank – which pays 3% interest and offers Clubcard points.”
There is also some evidence that consumer opinion about the ease of switching may be shifting, albeit very gradually. Consumer analytics company Aimia’s Loyalty Lens research, which has monitored consumer attitudes quarterly since 2013, shows only 15% of customers currently remain with their bank because they ‘can’t be bothered to change’. This is a slight drop from the one in five (20%) who said the same in 2013, before the Current Account Switch Service was introduced. Customer confidence in the switching service itself has also increased, up from 56% to 64% over the same time period.
However, Aimia estimates that many banks are not doing enough to keep their customers from moving to another provider. Only 5% of people in the firm’s survey of UK banking customers said they remain loyal to their bank because they feel their bank understands their specific requirements, while many feel their banks do not communicate with them in a way that fits their needs. Only one in 10 people (11%) say communications from their bank and building society are really relevant to their interests and just 6% say they remain with their bank because they are being rewarded for their loyalty.
When asked which tactics have the most influence on them, a third (33%) of people said loyalty rewards. The next biggest influence is word of mouth from family and friends (15%), then price reduction (10%), advertising (7%) and promotional offers (7%).
“It is easier than ever for consumers to switch current accounts, and banks and building societies need to work harder to attract and retain their customers,” said Charlie Humphreys, head of business development EMEA at Aimia. “Many banks are not currently getting their communications mix right, nor are they giving their customers a compelling reason to stay. Banks that don’t work hard to build strong relationships may well find their customers looking elsewhere.”