Bonuses and deposit rate increases have encouraged hundreds of thousands of customers to switch bank with their current account this year, according to the Current Account Switch Service.
Figures published on Thursday showed 341,000 accounts changed providers in the first quarter of the year, up 70 per cent compared with the same period last year.
Switching data showed customers took advantage of a competitive landscape. Incentives such as cashback schemes and switching bonuses of up to £200 also appear to help cushion any customer concerns about administrative headaches.
“At the start of the year the number of switching incentives on the market were at higher levels than seen in the past,” said John Dentry at Pay.UK, which operates the Current Account Switch Service, a sector organisation. “That drove switching volumes up by a considerable margin.”
Customers have become more alive to the incentives on offer, as providers jostle for market share.
Over 1.1mn current account switches were processed in the year between April 1 2022 and March 31 2023. Since the launch of a centralised service in 2013, the switching service has processed 9.1mn transfer requests in a UK market of 100mn current accounts.
End-user data, published with a three-month delay, showed that Nationwide experienced the largest net inflow — about 112,000 new customers — between October and December 2022. This compared with Big Six rival Santander, which lost 35,000 customers.
“Two hundred pound incentives now seem to be the norm and anything less than this benchmark in the future is likely to receive a lukewarm reception,” said Andrew Haggar at consultants MoneyComms. He said high inflation meant cash-strapped consumers were eager for extra income.
Switching bonuses and cashback offered by providers do not count towards the £1,000 annual tax-free personal savings allowance. The Current Account Switch Service is offered by over 48 banks, building societies and neobanks, such as Monzo and Starling.
The industry data under-reports the actual level of switching. For example, Chase UK, the offshoot of US group JPMorgan Chase, which has actively promoted account opening offers and grew to over 1mn customers last year, is still not a member of the service. Chase said it planned to join the switching service in the coming few months.
Dentry added: “There’s been a shift towards more digital access to banking and that has followed switching in general, while the pandemic drove an initial change in how consumers were carrying out their banking business.”
Successive rate increases have also made for a more attractive market for savers, according to Anna Bowes, co-founder savings monitoring website Savings Champion.
Last week, the Financial Conduct Authority, the UK’s financial watchdog, wrote to MPs in response to growing concerns that banks were relying on customer inertia to offer less competitive options. It said it was open to revisiting plans for a single rate for easy accounts or more “onerous interventions”.
About £256bn in easy-access savings accounts currently earns zero or near-zero interest, according to the Bank of England.
The BoE raised the bank rate to 4.25 per cent last month — the 11th increase in a row — pushing more providers into raising savings or current account rates. Higher than expected inflation could see rates increase further.
