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1m switch current accounts as banks offer bumper rates of interest
The number of Britons switching current accounts surges after launch of new switching service - and better rates of interest
More than one million people have switched bank account since the introduction of a national switching service a year ago.
The Payments Council, the trade body which established the “switch guarantee” as part of a drive to encourage competition in the current account market, said the total number of switches was up 19pc on the year before.
The current account market, which is highly lucrative with the chance to sell customers other products, is dominated by four banks – HSBC, Royal Bank of Scotland, Barclays and Lloyds – providing about three quarters of the UK’s near 50m accounts. Regulators are keen to encourage competition.
The Payments Council did not disclose a breakdown of the current accounts picked by those switching, but Spanish-owned Santander, the largest bank outside of the “big four”, said it had been one of the biggest beneficiaries. The bank, which offers a range of perks such as cashback and interest of up to 3pc, said 250,000 new current accounts had been opened.
Nationwide, which offers 5pc on balances up to £2,500 on its “Flex Direct” account, said it had attracted a record 100,000 new customers, mainly switching from the big four as well as the troubled Co-operative Bank.
It is hoped other new contenders in the current account market, such as TSB, Tesco Bank, Virgin Money and M&S Bank, will help shake up the market.
However, analysts suggested some of the increase in switching could be due to a battle on in-credit interest rates rather than the new switching service, which guarantees to move accounts in seven working days and ensures all direct debits are smoothly transferred. With savings rates desperately low, banks are pushing current accounts with bumper interest.
Santander pays between 1pc and 3pc interest on balances between £1,000 and £20,000. Nationwide’s “Flex Direct” offers up to 5pc on balances up to £2,500.
Gerard Lemos, from the Payments Council, said the service has made great ground in its first year. “It shows what can be achieved when highly competitive businesses put aside their differences to work together for the greater good,” he said.
David Mann, head of money at comparison service uSwitch, said there had been a “seismic shift” in attitudes. “We no longer see our bank as our lifetime companion.” he said.
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