The Coronavirus pandemic has stifled competition among banks in the current account market, leading to a dramatic fall in the number of people who are motivated to swap bank accounts.
Almost all of Britain’s high street banks pulled switching offers, with three-figure welcome offers from HSBC and NatWest vanishing and the likes of First Direct and Tesco Bank closing their doors to new customers entirely as they focused on existing ones.
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Since last year many banks have closed accounts to new customers and withdrawn switching bonuses.
Figures for the first three months of 2020 found Santander shed close to 30,000 accounts on the back of announced cuts to its 123 account.
There was also a 30% drop in people changing their bank accounts, according to data from the Current Account Switching Service (CASS). CASS was launched in 2013 to make it quick and easy for customers to switch their current account provider.
The total number of current accounts switched in 2020 was 704,560, compared to just over 1 million in 2019.
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By GlobalDataConsumers are not eager to switch bank accounts
The dip in total switching represents a change in consumer behaviour attributable to the pandemic, CASS noted. In the early weeks of the pandemic, data suggests that consumers were more reluctant to switch.
Jo Kenrick, chair of CASS says who people bank with may not be a priority during the pandemic.
“As a community, we must recognise the impacts of the pandemic will continue to be felt into the future and we must be prepared for this. Our activity in 2021 will help to ensure we remain mindful of how we deliver our collaborative role as the UK’s switching service for current accounts,” she said.
The fall, CASS said, was also prompted by banks taking a more cautious approach and lowering marketing efforts to potential new customers including some incentives being removed.
In 2020, the market saw increased switching activity from consumers and the gradual reintroduction of switching incentives into the market from banks.
In the 4th quarter of 2020 nearly 190,000 switches were completed via CASS, a third more than in the 3rd quarter of the year. In November 2020 alone 80,980 switches occurred, the highest monthly total since March 2020.
A pre-Covid trend picks up
The paring back of current account benefits began before the pandemic.
For example, Santander announced in January 2020 that interest paid on its 123 account would be slashed by a third along with a cashback cap.
The bank shed close to 30,000 account switchers in the first three months of the year.
This was nearly three times as many account losses as it saw in the last three months of 2019, and it has since said it will cut the interest rate again in August to just 0.6 per cent.
Many of Britain’s biggest banks including Barclays, Halifax, Lloyds Bank and Royal Bank of Scotland also suffered losses in the thousands after the banks announced their new overdraft rates in the first few months of this year.
It is likely current account switching will remain low in the months ahead, as banks continue to focus on existing customers while squeezed profit margins limit bank account perks and welcome bonuses.
