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Current account market gets a shake-up

Current account market gets a shake-up

Category: Banking

Updated: 11/03/2014
First Published: 11/03/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

There's been a flurry of activity in the current account market over the last few months, with banks and building societies all trying to compete for your money. From high-interest accounts to packaged accounts that come with a host of added extras you're certainly not short of options, and with there being several new accounts launched in the last few days alone the market is certainly hotting up.

Why so much activity?

The rise in activity can be largely attributed to the Current Account Switch Guarantee Service, launched in September last year, which made it easier than ever before for consumers to switch banks. The process was guaranteed to be completed in as little as seven working days, and that level of ease, combined with the publicity surrounding it, meant consumers would be more inclined to switch banks if they weren't happy – so the banks themselves have had to up their game.

They're now actively trying to compete for your business and are offering impressive incentives to get you to switch – or stay put. These include the likes of cashback, generous package deals (including everything from insurance to DVD rental), high-interest accounts and even cash incentives to switch.

Accounts that hit the headlines

Some of the most high-profile accounts to come to market recently have been those that offer high rates of interest, with as much as 5% being earned on balances up to a set amount. Nationwide's FlexDirect account is perhaps one of the better known options, paying 5% on balances up to £2,000 for the first year, but accounts also come from the likes of Clydesdale and Yorkshire banks (offering 4% interest up to £3,000) and Santander's 123 current account which offers tiered rates of interest depending on the balance.

Accounts offering cashback are becoming increasingly prevalent too. Some offer this benefit only on certain purchases whilst others are wide-ranging, so it could pay to do a bit of research to see what you can uncover. Several other accounts have hit the headlines with new deals and even new providers coming into being, with Tesco Bank and Virgin Money both announcing that they'll be launching new accounts this year.

In the last week alone M&S Bank has announced it's to launch a fee-free account (complete with gift cards, offers, reward points and a £100 fee-free overdraft facility) this summer whilst Sanatnder is shaking up the children's market with its 123 Mini account, mirroring its adult version paying tiered rates of interest.

Mobile payment services on the rise

Competition is clearly increasing, but the rise of smartphones and the demand for convenience means mobile payment services are on the up too.

These days a lot of banks offer mobile payment services of some kind – Barclays PingIt might spring to mind, but a lot of alternative apps are available as well – and now there's a new service that brings a whole range of providers together. The Payments Council has developed a service that offers a secure way for consumers to send and receive payments using just a mobile number, with an announcement coming yesterday that this new service will be called "Paym".

Paym's launch date is due to be announced next month, with the service being designed to link more current accounts than ever. Nine providers have so far signed up with more set to join over the next few months, and all customers will need to do is register their mobile number and select the account they wish to use for the service before it goes live. Paym will be integrated directly into customers' existing mobile banking or payment apps so there'll be nothing more to do, and they'll then be able to send and receive money without needing the additional hassle of sort codes, account numbers or setting up new payees.

Make the most of the shake-up

With so much innovation in the sector – both technology-based and from the range of new accounts being offered – it's a great time for banking customers. There's more choice and convenience than ever before, so if you think it's time to make the most of the changes make sure to compare current accounts and see if you could get more from your bank.

What Next?

Compare the best high interest bank accounts

Infographic: Switch your current account in 7 days

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.