6th Jan 2017
New rules around switching current accounts, along with the emergence of challenger banks, mean traditional retail banks are under increasing pressure to improve customer service in order to retain customers.
A study by research firm Kantar found that a growing number of customers are leaving the traditional Big Four banks for challenger banks, three years after the Government introduced the Current Account Switching Service to make switching accounts quicker and easier.
The survey of 24,000 current account customers found that although more than half the reasons for switching were linked to greater financial value – for instance, through rewards and offers – the banks with the strongest reputations for service, Nationwide and First Direct, were losing the fewest customers. In fact, since the introduction of the Government’s new switching service, Nationwide has increased its customer base by 10 per cent, compared with two per cent in 2014.
Counting the cost
Nationwide was the highest-scoring bank in The Institute of Customer Service’s UK Customer Satisfaction Index (UKCSI) last July, which revealed a correlation between banks’ customer service and net gains and losses in terms of customer accounts. However, the UKCSI also found that banking as a whole was the only sector that hadn’t improved its rating for customer satisfaction since July 2015.
The Institute warned that, with switching accounts becoming easier, banks that fail to improve customer service might quickly lose customers as a result.
The competition for customers continues to grow. This week saw House of Fraser announce plans to invest up to £35m in Tandem, a UK-based challenger bank, which will start offering financial solutions to the retailer’s customers this year.
Meanwhile, London-based Monese has secured £8m in funding. Monese enables expats, migrants or anyone seeking a non-traditional bank with which to open a bank account in the UK to do so by taking a selfie and a picture of their photo ID and uploading it to the company’s mobile banking app. It has already attracted more than 40,000 customers from 179 countries.