Over 1.2 million people have moved their current account to another bank since a new quick-fire switch service was launched a year ago.
Figures released by the Payments Council suggest that the new seven-day Current Account Switch Service has boosted the number of switchers by over 20%.
1,203,334 people switched their current account during the year to the end of September, compared to 985,600 in the previous twelve months.
The Payments Council, which designed the service, said it had created “perfect conditions” to help banking customers find better value from their current accounts.
Stats indicate that Halifax, Santander and Nationwide have been popular destinations for switching customers, while Barclays and RBS have seen the biggest drop in customer numbers.
The impact of the £750 million switching system could grow further, with figures indicating that almost seven out of 10 consumers are now aware of the service and feel confident in using it.
Gerard Lemos, the chief executive of the Payments Council, said: “By making switching bank accounts easier for customers than ever before – with the added peace of mind delivered by the Current Account Switch Guarantee – we have created the perfect conditions for competition and choice to flourish amongst new and existing current account providers.”
What benefits does the switch system offer?
The obvious benefit of the new switch system is the speed at which switching accounts can take place.
From September last year, participating banks had just seven days to arrange a transfer – cutting previous account-switching times by as much as 75%.
Other benefits include an automated payment redirection service which handles any leftover payments involving the old account.
Both inbound and outbound payments sent to the old account are automatically forwarded to the new account for 13 months, eradicating most of the problems that arise from making a switch.
So if a switcher's employer fails to update his or her details in time, the payment still goes through and the customer has a year to resolve this before the old account details expire.
Finally, the switch service comes with a compensation guarantee if anything goes wrong, adding peace of mind to the process.
Mr Lemos said that customers thinking about switching should follow their instincts. “There has never been a better time to do it,” he said.
Where to switch to? Five top offers:
Another knock-on advantage of the new service is that it has encouraged current account providers to improve their offers.
Providers that offer no perks have started to struggle, while banks like Halifax and Santander are proving that rewards for current account customers are attractive in today’s market.
Halifax has welcomed the largest number of switchers since the new system launched, and it’s not difficult to see why. Alongside a £100 joining bonus, the Reward Account pays £5 per month when users pay in £750, meaning users could be £160 up after the first year. The account offers a generous £50 overdraft buffer and cashback opportunities for debit card use.
The 123 current account offers up to 3% interest on credit balances and up to 3% cashback on household bills. Customers can also benefit from a year's free use of the 123 cashback credit card (normally £24) and 1% cashback on Santander mortgage payments. The account allows customers to generate excellent rewards on essential areas of spending.
See our review of the 123 current account here.
Nationwide’s FlexDirect account offers 5% interest on balances up to £2,500 for the first year when users pay in £1,000 a month (1% thereafter). It also offers a fee-free overdraft for 12 months and allows access to the society’s Flexclusive savings products. The packaged account, FlexPlus, offers 3% interest alongside a host of comprehensive insurance products for a knockdown £10 a month.
Find out more about the FlexDirect and FlexPlus accounts.
Following its split from Lloyds last year, TSB was quick to stamp its own authority with a new account offering a joint market-leading 5% interest. Customers will receive 5% on the first £2,000 of their current balance, provided that they pay in £500 a month. Unlike Nationwide, this is not propped up by a temporary bonus. Customers will also escape overdraft fees and interest if they go over by less than £10.
See our review of TSB’s Classic Plus here.
First Direct, the online bank based in Leeds, matches Halifax’s £100 joining bonus. It has also received numerous awards for customer service. Both Which? and Nunwood have handed First Direct the top gong for service this year, and in a market where customers struggle to achieve good service, this must become a standout quality.
See our defence of First Direct against Move Your Money’s views here.