“Big four” banks lose ground in current account market

UK consumers are increasingly willing to switch – but numbers remain limited

The big four high street banks lost ground in the current account market in the first year of the UK Payments Council’s current account switching service, mainly through poor customer service. But the guarantee did not accelerate the pace of account switching, according to an independent survey of bank customers.

According to data provided by TNS UK, Santander was the main beneficiary of switching, even though it suffered a high number of losses: 22% of all switchers joined Santander, with 10% exiting the bank. Halifax gained a net 6% and Nationwide a net 5%.

HSBC was the main loser, accounting for 11% of all switchers out and only 3% of switchers in. Barclays performed best of the traditional big brands, with a net loss of only 1% of switchers: the survey suggests that its performance was bolstered by its online/mobile offering.

The Switch Guarantee was launched by the Payments Council at the end of September 2013, it guarantees hassle-free switching within seven days. The study by TNS UK found that the rate of switching is little changed, remaining at between 3% and 4% per annum.

The main driver for switching remains customer service, cited by 23% as a reason for leaving and 12% as a reason for choosing. The top reasons for choosing – all scoring 15% – were reputation, rewards and convenience. Online and mobile banking are now given as selection criteria by 10% of switchers and this has climbed steadily in the last year.

Separate further analysis by TNS UK explored consumers’ strength of attachment to each bank in relation to its market share. These findings suggest that the switching trend away from the big four banks will continue – 9% of their combined share is at risk with individual losses of between 1% and 3%.

Of the current winners, the picture is brightest for Nationwide and First Direct: their strength of consumer attachment indicates a further potential 2% share gain for each. The figures for Santander and Halifax suggest that they may struggle to maintain switching at the current levels as there is a lack of latent desire for their brands.

“The Switch guarantee has removed the barriers to switching, but it has not created a reason to switch,” said Jamie Willard, director at TNS UK. “Unless a truly different offering arrives to transform the market, switching is likely to continue at around its current rate. The number of those motivated by poor service to change their banks indicates that much of the banking industry has still to address the issue of poor service, which was an important reason for the creation of the guarantee in the first place.

“We believe that the slow transition away from the traditional banks will continue. We can see a day when a traditional bank is no longer the automatic choice and everyday banking becomes equally associated with retail organisations in the physical or digital world. We believe that there will be further new entrants to the market, as organisations with powerful brands seek to extend their role in the lives of their customers.

Despite the emphasis on competition when the current account switching service launched, none of the newest retail banking entrants have made a significant impact. However, the predictive research suggests potential for brands including Tesco, M&S, Virgin Money, Metro Bank, Post Office, Handelsbanken and Aldermore to achieve a combined market share just short of 10% based on the current strength of consumer attachment to their brands.