About a year ago, the current account switch scheme was introduced to make it easier for customers to move to a different bank account provider and open bank account online. Today, around 1.11 million customers have already switched. That’s about 19%1 higher than the number of account moves made during the previous year, before the service was introduced.
The scheme enables customers to switch current accounts in just seven working days, compared to as long as 30 days before the scheme was launched. And, regular outgoing and incoming payments are now automatically arranged to be moved to the customers’ new account.
So, why are so many people switching accounts now? And what stopped them moving before?
The switching service has both simplified the process and increased competition between the banks. For example, a number of providers offered tempting financial incentives and special offers of higher interest rates to help persuade people to move over to them2. And, it seems that customers are becoming increasingly unhappy with High Street bank service issues and technical glitches, so they’re deciding to take their business elsewhere. On the other hand, the ‘interesting’ antics of one former chairman and miss-selling investigations are thought to have prompted many to leave some institutions2.
The majority of account movers seem to be taking their money from High Street banks to building societies, suggesting that banks are going to have to do more to keep customers. Kevin Mountford, head of banking at MoneySuperMarket, said, “Customers are ditching big name banks for challengers with hot offers, or just cleaner reputations”2.
Already this year, many bank branches have been closed down and thousands of jobs have been cut, with more closures planned over the next few years.3 One bank brand has taken the innovative step of opening branches within a supermarket chain, so that it can maintain a presence on the High Street, where its customers are likely to be, but with reduced costs.
As if the outlook for banking on the High Street wasn’t already bleak, studies suggest that about a third of us mainly bank online4. Perhaps the High Street banks need to focus on excellent service, for fear of customers switching accounts.
But what if a customer doesn’t want to just switch to yet another High Street bank?
Well, there are plenty of alternative providers out there, such as prepaid cards.
Some prepaid card accounts, such as the Cashplus prepaid Gold MasterCard®, make an excellent alternative to a High Street bank account. Wages or benefits can be paid straight into the account, Direct Debits can be set up to automatically take care of regular bills and customers can make withdrawals and pay for things wherever they see the MasterCard Acceptance Mark.