Nationwide Building Society has launched a refer a friend switching offer, promising £50 ($81) to both the existing and the new customer. The Co-op Bank has also announced a similar offer, promising £100 to new customers setting up an account, writes RBI editorial
Nationwide will offer the chance for current account customers to recommending up to ten friends per year, giving them the opportunity to earn £500 in 12 months.
Phil Smith, Nationwide’s head of current accounts, says: "Word of mouth is valuable to us as it shows that our customers are pleased with the products and service we offer and that they are willing to recommend us to their friends and family.
"There are a number of switching offers on the market, but ours is the only one that rewards existing customers as well as new customers".
The Co-operative bank’s pledge will be divided in £100 that will go to the new customer account and £25 that will be allocated to a charity chosen by the new current account holder.
There has been much interest from stakeholders as to how the Co-op will position itself after a tumultuous year in 2013.
Jafar Hassan, personal finance expert at uSwitch.com says: "While a cash initiative can seem very attractive, benefits such as interest on balances and cashback rewards could be more valuable over the long term so it’s important that consumers consider all of their option, before switching.
"However with the Co-op Bank offering the extra perks of a fixed rate Individual Savings Account with up to 2.2%, and preferential rates on Co-op loans and credit card products, it could give consumers the whole package".
These offers are the latest attempt by the banks to drive competition and differentiation between the UK’s banks, around six months after the introduction of a "seven day" switching rule for customers to switch their bank accounts from one institute to another.
According to the Payments Council, changes to the rules saw a 17% surge in the number of people changing banks during the last three months of 2013, compared to the previous year.
In terms of account switching stats, the Co-op Bank moved into a negative position in December, with 3%of joiners but 4% of leavers.
The latest TNS Current Account Switching Index shows that the banks that are challenging the traditional UK big four (Lloyds, HSBC, RBS and Barclays) have the upper hand with the switching population, with almost 60% choosing one of this group.
If this pattern continues, the risk to traditional banks is an annual combined share loss of 2% of current accounts.
The poll also shows Santander is the biggest gainer, with 22% of switchers now choosing them compared to 17% before the introduction of the Current Account Switch Guarantee.
However, the overall number of switchers remains stubbornly low.
While switching levels are unchanged between 3% and 4%, there is clear evidence of switchers closing their previous account: 66% compared to an average of 50% in the last quarter of 2013.
Customer service is still the strongest reason for switchers leaving their previous bank and financial incentives the strongest reason for selecting their new bank.
Switchers continue to be highly satisfied with the switching process (81%) and with their chosen new bank (83%).
However, following recent branch closure announcements, for 1 in 4 customers channel and logistical considerations (branch proximity and opening hours, mobile and internet banking facilities), were behind their choice of bank. TSB benefited particularly from having convenient branches.
Whilst 60% of switchers’ choice of bank was not influenced by other product holding, there is some evidence that savings and mortgages may have some influence. 19% had a savings product with their new bank, compared to 16% with their previous bank and 8% had a mortgage with their new bank compared to 6% with their previous bank.
Maureen Duffy, CEO of TNS UK, says: "Whilst making switching easier is to be welcomed, these results show it doesn’t create a sufficient reason for customers to switch.
It may take the next wave of current account entrants, such as Tesco and Virgin, to cause customers to re-evaluate their current account product and provider. This will largely depend on how attractive or disruptive their offer is."