Bonuses and increases in deposit rates have encouraged hundreds of thousands of customers to switch banks with their checking account this year, according to the Checking Account Switching Service.
Figures released Thursday showed that 341,000 accounts switched providers in the first quarter of the year, 70 percent more than in the same period last year.
The turnaround data showed that customers took advantage of a competitive landscape. Incentives such as cash back schemes and changeover bonuses of up to £200 also appear to help assuage customer concerns about administrative headaches.
“At the start of the year, the amount of switching incentives in the market was at higher levels than seen in the past,” said John Dentry at Pay.UK, which operates the Current Account Switching Service, an industry organization . “That boosted change volumes by a considerable margin.”
Customers have become more receptive to the incentives on offer, as providers jockey for market share.
More than 1.1 million checking account changes were processed in the year between April 1, 2022 and March 31, 2023. Since launching a centralized service in 2013, the exchange service has processed 9.1 million transfer requests in a UK market of 100 million checking accounts.
End-user data, released with a three-month lag, showed that Nationwide experienced the largest net inflow (around 112,000 new customers) between October and December 2022. This compares to Big Six rival Santander, which lost 35,000 customers.
“£200 incentives now appear to be the norm and anything below this benchmark in future is likely to receive a lukewarm reception,” said Andrew Haggar of consultancy MoneyComms. He said high inflation meant cash-strapped consumers were eager for extra income.
Change and cashback vouchers offered by suppliers do not count towards the £1,000 annual tax-free personal savings allowance. The checking account exchange service is offered by more than 48 banks, building societies and neobanks, such as Monzo and Starling.
Industry data underestimates the actual level of change. For example, Chase UK, the arm of US group JPMorgan Chase, which actively promoted account opening offers and grew to more than 1 million clients last year, is not yet a member of the service. Chase said he planned to join the exchange in the coming months.
Dentry added: “There has been a shift towards more digital access to banking and that has followed the shift in general, while the pandemic prompted an initial shift in the way consumers did their banking business.”
Rolling rate hikes have also created a more attractive market for savers, according to Anna Bowes, co-founder of 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. He said he was open to reviewing plans for a single fee for easy accounts or more “burdensome interventions.”
About £256 billion in easily accessible savings accounts currently earn zero or close to zero interest, according to the Bank of England.
The BoE raised the bank rate to 4.25 percent last month, the 11th consecutive increase, prompting more providers to raise savings or checking rates. Higher-than-expected inflation could cause rates to rise further.
