Derin Clark

Derin Clark

Online Reporter
Published: 24/10/2019

Consumers are more likely to switch to a challenger bank than well-known high street banks the latest Current Account Switch Service (CASS) figures reveal.

The latest CASS data shows a sharp fall in the total number of switches gained by some of the biggest banking brands on the high street compared to the start of the year, whereas challenger banks like Monzo Bank and Starling Bank are gaining thousands more switchers. The number of switches could be set to tumble as we edge closer to the end of 2019, as banking customers may not feel motivated to move in the run-up to the festive period.

A reason for the drop in the number of switches to high street banks could be due to a lack of incentives being offered to customers to switch, but some brands have made attempts to entice customers to switch, such as with HSBC launching a £175 cash incentive in September. However, customers may prefer to bank with a brand that offers a decent service.

The latest analysis from Moneyfacts.co.uk has highlighted providers that offer some of the best current accounts on the market, along with their overall service quality score.

Selection of accounts Account Cashback Benefits Cost to borrow £300 for 15 days Overall service quality score (CMA/Ipsos)
Switching incentive HSBC Advance £175 upfront for switchers since 16.9.19 (was also £175 until 23.7.19)  Access to discounts and offers online; 2.75% regular saver (was 5%) £2.20 (17.9% EAR) 62%
High interest Nationwide Building Society FlexDirect Refer a friend and get £100 (max five friends per tax year) 5% AER credit interest on balances up to £2,500 (first year)  12 months’ free overdraft, thereafter £7.50 (£0.50p per day)* 74%
Spend and save Santander 123 Current Account** 1-3% cashback on selected household bills 1.50% AER credit interest on balances up to £20,000; access to 123 World offers Four months’ free overdraft, thereafter £15 (£1 per day) 61%
Overdraft usage first direct 1st Account*** £50 for switching; earn cashback with selected retailers (was £100) 2.75% regular saver offered exclusively to account holders (was 5%) First £250 interest-free, thereafter £1.96 pm in interest (15.9% EAR) 82%

*Tariff set to change to a flat rate of 39.9% EAR from 11.11.19. **£5 monthly fee. ***£10 monthly fee scrapped since 14.9.19. Source: Moneyfacts.co.uk

Rachel Springall, finance expert at Moneyfacts.co.uk, said: “Banking customers may feel less enthused to switch this time of year but it hasn’t stopped some banks from trying to tempt them, such as HSBC with its £175 free cash offer. However, as we have seen before, a free cash sweetener can be short-lived and in 2019 these have come and gone.

“It could well be the case that current account providers are assessing how they can sustain add-ons to their accounts amid economic uncertainty and drastic movements in the banking sector – such as the overdraft fee crackdown by the Financial Conduct Authority (FCA). We are already seeing brands cutting down perks that can reward customers for longer – such as with changes already in place from Nationwide Building Society, with more inbound in November.

“According to CASS figures, Nationwide Building Society drew in the more net gains than any other participant of the scheme between January to the end of March (38,788). However, it pulled its linked 5% AER regular savings account and scrapped its SimplyRewards programme in the Spring. Customers who have a FlexPlus Account will no longer earn 3% credit interest from November either, so with these changes afoot, it is uncertain how many customers will remain loyal.

"Still, the latest CASS figures show a net gain of 26,466 between April and the end of June 2019, and Nationwide Building Society continues to offer a market-leading 5% AER credit interest on its FlexDirect. The overdraft tariff will be changing in November, so a review of the overall package may be needed. Banking customers may not be switching just for an upfront perk, and perhaps are looking for better service – which could explain why Nationwide Building Society continues to pull in customers with its 74% service rating.

“One bank that has improved its overall cost and reduced its upfront perk has been first direct. On its 1st Account, it scrapped its £10 monthly account fee but also reduced its £100 free cash incentive to £50, and most recently cut the linked 5% regular saver to 2.75%. As first direct achieved a service score of 82%, it may not need a large cash perk to draw in customers, as its service can speak for itself.

“Banking customers looking for sweeteners may not want to hang around if they plan to switch right now. There is no guarantee that benefits for existing customers will be offered forever, as proven this year. It is vital consumers consider an account that is suited to their day-to-day banking needs and not just for a freebie.” 

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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.

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