Current account customers are ditching the ‘big four’ banks in order to get a better deal.
New statistics released by the Payments Council reveal that Lloyds Bank, Barclays, HSBC and Royal Bank of Scotland all lost more current account customers than they gained in the final quarter of 2013.
In fact, these banks and their subsidiaries registered a combined net loss of 52,172 customers during this period.
Halifax, Santander and Nationwide emerged as the big winners in the battle for current account customers in the final quarter of 2013, registering a net gain of 89,012 between them.
Yet, the ‘big four’ banks still share close to 80% of the current account market.
So, at a time where many smaller banks are also staking a claim for a bigger proportion of the current account market, we explore whether it’s worth ditching the ‘big four’.
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What do lenders outside the ‘big four’ have to offer?
Many of the customers switching to Santander and Nationwide are likely to have been tempted by the rewards offered to customers who always stay in credit.
Nationwide’s FlexDirect account offers 5% interest on balances up to £2,500 for the first 12 months (1% thereafter), while the Santander 123 account pays 3% interest on balances up to £20,000 as well as cashback on a range of household bills and purchases.
A number of newcomers to the current account market are also offering enticing rewards to new customers.
Tesco Bank’s current account pays 3% interest on balances up to £3,000 alongside a decent Clubcard reward scheme, while customers opening a new M&S Current Account will receive a £100 M&S gift card.
Meanwhile, TSB recently announced that it opened 9.2% of all new and switching current accounts in the three months from February to April. Its Classic Plus Account pays 5% interest on balances up to £2,000.
Go further: Best bank accounts if you always stay in credit – find out which account offers the best rewards
Bank account switching figures remain low
The Current Account Switching Service, which launched in September, guarantees that customers will be able to switch bank accounts seamlessly within seven days.
Around 592,000 current accounts were switched in the first six months of 2014, which represents a 16% increase compared to the same period last year.
However, Which? executive director, Richard Lloyd, claimed that this was not the avalanche needed to transform the current account market.
He said: ‘Poor products, high complaint numbers and low switching levels show the unhealthy dominance of our big banks, and unless we see a greater injection of competition this stranglehold will go on. It’s time for the Competition and Markets Authority to take a closer look at banking.’
Go further: Current Account Switching Figures Q4 2013 – see the gains and losses for each provider
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