• Switch guarantee has made little difference to overall levels of switching
  • Four main banks lost more customers than they gained in first year of Switch - biggest winner is Santander

London - 21 November - The market for current accounts has begun to change in the past year, under the government-backed Switch guarantee to make switching easier, data from TNS has shown. But the change has not been rapid enough to head off the inquiry announced on 6 November by the Competition and Markets Authority into the markets for personal and small business accounts.

In announcing its investigation, the CMA cited “very little movement over time in the market shares of the four largest banks”.

The traditional High Street brands have lost ground, and analysis of the data shows that a significant proportion of their market share – amounting to a fifth of their customer base, is at risk of defection.

The TNS Current Account Switching Index (CASI) surveyed 16,500 current account customers in the run-up to the September 30 launch of Switch last year, and 143,000 in the four quarters since the launch.

The data shows that just 3.1% of current account customers changed their provider in the first year of Switch, slightly below the pre-Switch rate of 4.1%.

The first year of Switch has seen a slow erosion in the customer base of the four main banks – Lloyds, Barclays, HSBC and RBS/NatWest. All of these banks have lost more customers through switching than they have gained.

  • HSBC has suffered the biggest net loss, accounting for 11% of all switchers out and only 3% of switchers in.
  • Lloyds and NatWest each had a net loss of 4%.
  • Barclays lost 11% of all switchers, but gained 10%, suffering only a minimal net loss: the survey suggests that its performance has been bolstered by its strong online/mobile offering.
  • Amy Cashman, Managing Director, Finance, TNS UK said, "The good news for banks is that despite these switching losses among the main banks, because overall switching levels are low, there has been limited movement in their overall market shares".
  • However, a new TNS ConversionModel study of 2000 current account holders, designed to complement the continuous CASI monitor, reveals that a significant number of the main banks’ customers are “in play” and could be attracted to rival banks.

The analysis compares predicted market share with potential future share, which is evaluated by assessing how attracted consumers are to a brand, based on both performance and emotional factors.

The TNS ConversionModel study also showed that the future potential market share for the big four banks is 42.8%, against their current 51.7%, putting a total of 8.9% of the market “at risk” of defecting from these banks. The biggest potential winners are Nationwide and First Direct, which could push their share from a combined 10% to 13.2%.

In the first year of Switch, the beneficiaries have mainly been other significant players in the market – especially Santander, which accounted for 22% of those switching in, but also suffered 10% of all switchers out. Halifax gained a net 6% (16% in and 10% out), Nationwide gained a net 5% (10% vs 5%).

Analysis of customer attachment to these brands suggests that, as things are, neither Santander nor Halifax stands to make further significant gains.

The Switch data shows little evidence of switching to new market entrants: with the exception of Metro Bank, none of the new entrants registered even a 1% gain in switchers. Announcing its investigation, the CMA cited “continuing barriers to entry and expansion into the sector, limiting the ability of smaller and newer providers to develop their businesses.”

Awareness and justification for switching
The data also shows that awareness of Switch has reached 59% overall, a figure that is unchanged for the past six months, suggesting that awareness has stabilised.

The main driver for switching remains customer service: cited by 23% as a reason for leaving and 12% as a reason for choosing. The top reasons for choosing – all scoring 15% - were reputation, rewards and convenience. Online and mobile banking are now given as selection criteria by 10% of switchers and this has climbed steadily in the last year.

Collectively, financial benefits were the strongest reasons for selecting the new bank with rewards and credit interest rates being stronger selection criteria than a special offer. These were clear motivations in the choice of Santander and Halifax.

Although the sample size of switchers to First Direct is small, the brand is strongly chosen for its reputation, the expectation of better service supported by a special offer.

Amy Cashman, Managing Director, Finance, TNS UK said, “From my observations, the Switch process appears to be working well, though it has not led to a significant increase in the numbers switching their current account. Customer service has been consistently given a the main reason for switching – by around a quarter of those moving their accounts – which suggests that a trigger is required for a switching decision over and above the existence of the guarantee.

“It is worth noting that Santander and HSBC – the biggest net gainer and the biggest net loser – have lost a similar number of switchers and it is probably no co-incidence that they are the two banks most mentioned for poor customer service.

“The number of those motivated by poor service to change their banks indicates that much of the banking industry has still to address this issue, which was an important reason for the creation of the guarantee in the first place.

“Accounts are no longer a vanilla product – there are real differences out there. There is no doubt that over the past two years clearer differences have developed between current accounts. It will be interesting to see if benefits such as credit interest on current accounts become the norm rather than the exception.

“The CMA criticised ‘limited transparency, and difficulties for customers in making comparisons between banks, particularly for complex overdraft charges on personal current accounts.’ There is no doubt that this is a real concern and that differentiation may be creating confusion as well as choice.”

Notes to editors:
Nationally representative sample of 16,500 current account holders were interviewed before the introduction of the Switch Guarantee between 12 July and 16 September 2013.  Nationally representative sample of 143,000 account holders interviewed in a series of monthly surveys to construct the TNS Currant Account Switching Index between 20th September 2013 and 14th September 2014. A total of 5347 switchers were identified. Interviews conducted face-to-face in-home twice weekly.

For further information please contact rosi.mcmurray@tnsglobal.com.

About TNS
TNS UK advises clients on specific growth strategies around new market entry, innovation, brand switching and stakeholder management, based on long-established expertise and market-leading solutions. With a presence in over 80 countries, TNS has more conversations with the world's consumers than anyone else and understands individual human behaviours and attitudes across every cultural, economic and political region of the world. TNS is part of Kantar, one of the world's largest insight, information and consultancy groups. For further information, please visit www.tnsglobal.com/uk.

TNS UK was awarded the Market Research Society's (MRS) Agency of the Year 2013.

About Kantar
Kantar is the data investment management division of WPP and one of the world's largest insight, information and consultancy groups. By connecting the diverse talents of its 12 specialist companies, the group aims to become the pre-eminent provider of compelling and inspirational insights for the global business community. Its 27,000 employees work across 100 countries and across the whole spectrum of research and consultancy disciplines, enabling the group to offer clients business insights at every point of the consumer cycle. The group’s services are employed by over half of the Fortune Top 500 companies. For further information, please visit us at www.kantar.com.