Banks: bribe customers to stay put …
Hey! Mr Retail Banker, don’t get too worried about the new UK Account Switching regulation that comes into play in September – just offer your customers some money. About 100 quid should do it.
According to research by the banking arm Simon-Kucher & Partners, Almost half – 49% – of UK current account holders are likely to consider switching their account as a result of the new seven day switching regulation which will go live in September 2013.
In reality, switching rates are likely to double from today’s 2.5-5% to 6-12% as a result of the new service.
But while people in the study gave all sorts of good reasons for switching, they also said they could be persuaded to stay by incentives, the top three of which were:
1.One-off gift “up to £100”
2. Better interest rate on savings
3. Better interest rate on current account
These incentives would serve to retain 86% of those who would consider switching their current account, the study reckons.
“Banks need to develop propositions to retain current account holders as there will be an increase in switching rates,” said Jens Baumgarten, banking partner of Simon Kucher. “There are opportunities for banks to understand the price of loyalty in order to retain these customers and protect their market shares.”
It works both ways, though: while online banking is the main feature that attracts current account holders when looking for a new bank to switch to, followed by the ability to transfer all regular payments, introductory bonuses for switching are also highly popular. Some banks are already doing this – First Direct now offers £100 to new current account customers.
Of course, some consumers might try to take advantage of this by “double-dipping”, taking the money to not move, then moving a bit later to an account with introductory offers.
