- Although the pandemic had the potential to deter users from switching banks, cash bonuses meant to draw in customers proved effective.
- But institutions need to do more to retain new users.
- Insider Intelligence publishes hundreds of research reports, charts, and forecasts on the Banking industry.Learn more about becoming a client.
Current account switching in the UK fell around 30% last year as the pandemic raged in the country, per AltFi.
In total, 704,560 switches occurred throughout 2020, compared with over 1 million in the previous year. The figure was aided by a strong rebound in Q4, with nearly 190,000 switches taking place—including the highest monthly total since the crisis began. For context, current accounts are akin to checking accounts in the US.
The decline was likely driven by a reduction in marketing efforts by banks—highlighting the importance of switching incentives. Surprisingly, the pandemic appeared to have a more significant impact on banks’ end than on consumer sentiment. Customers actually switched the most when coronavirus cases were at their highest; even when the country was in lockdown for all of November—which was the service’s best month since March 2020.
According to the chair of the Customer Account Switching Service (CASS), banks withdrew some incentives in response to the pandemic and didn’t reinstate them until late summer. It is possible that some customers are just less inclined to switch banks in the middle of a crisis, but the timing of the rebound indicates that switching bonuses remain a powerful customer acquisition tool.
Cash incentives help entice customers to leave their bank, but institutions need to offer more value-added services to retain them. Here are two ways banks could achieve this:
- Adding more personal financial management (PFM) tools: Features that enable customers to reduce subscription costs, assess spending levels, and identify savings and investment opportunities could tie users more closely to their banks. Institutions could strengthen their customer relationships by personalizing these insights—possibly following Bank of America’s lead, which recently added animated assessments that show a customer’s financial position.
- Increasing access to human advisors: Personal interactions are still important to UK consumers, and banks should do more to enable them. NatWest is already making strides in the right direction, expanding hours and adding video capability to allow customers to directly interface with a human banker at their convenience. This could be particularly useful for incumbents, which don’t currently fare well in terms of overall service quality compared with their digital counterparts.
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