Three years on, should banks feel threatened by the UK bank switching initiative?
It has been three years since the Current Account Switch Service (CASS) was launched in September 2013 to give consumers a simple, reliable way of switching current accounts – as opposed to the laborious task of manually transferring direct debits and regular payments from one account to another.
CASS has now facilitated well over 3 million switches – 74,000 of which being small business, trusts and charity accounts – with 99.7% of accounts being successfully switched within seven working days. The number of banking providers using CASS has increased from 33 when the service was first introduced to 43 today.
Making this process easier means people are more actively assessing their current account options than ever before. This, in turn, has increased the level of competition between banks and is encouraging the entry of challenger banks to the market by giving them the chance to offer switching incentives that can rival the big boys’. As a direct result of this, a report from the Social Market Foundation found that there have been 150 improvements to existing current account options since CASS was introduced to lure dissatisfied account holders away from their existing banks.
This is a massive win for the consumer – more choice, moreincentives, and easier switching means a new level of freedom, even if they are currently ‘tied up’ in a current account. But, is breaking the banks’ hold on their current account customers something these institutions should fear?
It certainly doesn’tseem so– with more and more banks signing up to the scheme and offering various incentives to new customers, they appear to have taken this as an opportunity to refresh stale account options and differentiate themselves from competitors. With levels of consumer loyalty continuing to decline, the financial institutions have a ‘clean slate’, and can now target a market that didn’t really exist before the introduction of CASS.
The risk really lies in the untapped potential of CASS. In 2013, it was estimated that there are 65million active personal current accounts in the UK. From 2013 until now, there have been 3.25 million account switches using the service. That means, potentially, there are 61.75 million accounts that have not yet utilised CASS.
CASS and Bacs – which operates the service – are certainly trying to make a dent in that number by launching a new multi-million-pound advertising campaign aimed at increasing the level of awareness and confidence in the service on its third birthday. If the dormant masses were to be stirred by this latest campaign, the banks would have to find a good balance between incentivising the switch and maintaining a good level of service and rewards for existing account holders in order to retain their custom. Potentially, there could be something of a ‘merry-go-round’ of account switching from bank to bank to bank if this balance is not found.
However, the banks needn’t be too daunted by the prospect of 60 million-or-so accounts flying between institutions – simply because it will not happen. The fact of the matter is that, after three years, three quarters of people in the UK are aware of the service… but only 3 million have switched despite the obvious benefits. A combination of very British factors is the reason for this: fear of change, force of habit and the ongoing attitude that ‘all banks are the same’ all combine to outweigh the benefits in the minds of the untapped masses.
All things considered, while I would expect to see the number of switches continue to climb due to the renewed publicity campaign by CASS, I can’t imagine the growth being so explosive it requires the banks to rethink their entire strategies.