Research firm aims to identify winners and losers in High Street struggle
A new monthly index that measures UK current account switching has been launched by research firm TNS, providing a snapshot of changing consumer behaviour as the UK Payments Council’s switching service begins to take effect.
The TNS Current Account Switching Index is a UK study conducted by TNS Omnibus. In its first iteration it interviewed 8,258 banking customers between 12 July and 16 September 2013 and found that major high-street banks such as NatWest, HSBC and Lloyds are losing customers to rivals including Santander, Nationwide and Halifax.
The figures compare the percentage of customers switching towards and away from each of the major UK current account brands over the last 12 months. NatWest was the biggest loser: some 15% of all switchers moved away from the bank, while only 7% joined – a net loss of 8% of all switchers. Santander was the biggest winner; while 11% of switchers left the bank, 20% of them joined, giving a net rise of 9% – although the absolute numbers remain small.
Some 1.3 million people switched their current account last year – so 8% of that represents a small proportion of the 7.5 million customers held by NatWest alone, for example. TNS plans to update the study monthly, so it will be possible to track the effect of the new switching service over time.
Nationwide put in a strong performance, with a net gain of 6% based on switchers joining the building society (11%) at more than double the rate of switchers leaving it (5%). Other winners were Halifax with a net gain of 4%, Co-operative Bank at 3% gain, and First Direct, which had a net gain of 1%.That compares against HSBC where switchers left the bank (10%) at more than double the rate of switchers joining it (4%). Other losers included RBS (2%), Bank of Scotland (1%) and Barclays (1%).
The reasons most commonly given for leaving a bank were poor customer service (24%), followed by competitive rates at a rival (22%). Reasons for joining a new bank were competitive rates (26%) followed by reputation (17%), customer service and branch hours (16% each) and special offers (10%).
“With the heavily advertised Santander 123 current account now offering 3% AER interest on balances over £3k and cash back, it is probably not surprising that they are an early beneficiary,” said Maureen Duffy, chief executive of TNS UK. “However, as ‘competitive rates’ become more ubiquitous amongst banks it will be those other fundamental differentiators such as customer service, reputation and opening hours, that will drive recommendation and influence consumer choice.”
The UK Payments Council introduced a seven-day switching service on 16 September, which obliges banks to switch a customer’s account to a rival within a maximum of seven days, should the customer wish it. The bank is responsible for transferring all direct debits and standing orders without the customer having to do anything. Any mistakes must be refunded in full immediately. The customer doesn’t even need to tell their bank about the switch – it is enough to simply provide the new bank with the necessary details. The rest of the process will be handled by the ‘destination’ bank.
According to the TNS figures, 86% of people who switched were satisfied with the experience, while 52% were “very satisfied”. Overall awareness about the switching service had reached one in three people by early October, with the highest level of awareness among the age group 55+ at 44%. The figure represents an increase on three months ago, when only 15% of people had heard about the account switching service. However, it is still too early to judge the exact contribution of the new service to the rates of switching, which were already increasing at Nationwide for example.
The figures also didn’t include Metro Bank, which reported in May it was opening 12,000 current accounts a month. Metro Bank was the first new bank in the UK for 150 years when it opened in July 2010, and is currently hoping to be one of the main beneficiaries of the account switching service. Metro Bank will open four new stores in the UK before the end of the year.
“The launch of the Payments Council’s new service has undoubtedly been successful, predominantly in increasing awareness of the switching scheme, but also in ensuring that those who do switch are satisfied with the experience,” said Duffy. “However, we are still only seeing relatively small numbers actually switching and a lot of those who do are choosing to keep one foot in the other camp by keeping old accounts open. The reasons for this is probably more to do with the immaturity of the new ‘switching’ landscape, but possibly also customer inertia as people continue to perceive that the process of switching is more hassle than the resulting benefits.”