THE number of Britons switching bank accounts grew by 12 per cent to 1.16 million in 2014, according to data from the Payments Council.
The figures indicate that the Government is making progress in its drive to increase competition in the banking sector. However, Which? the pressure group that campaigns on behalf of consumers, believes tougher action is needed to tackle the “lack of trust” in the market.
Rules introduced in 2013 to ensure customers can switch accounts within seven working days are part of a range of measures which aim to ensure that Britain’s big banks face more competition.
The reputation of many of the big banks has been tarnished, by scandals ranging from mis-selling to rate-rigging.
“The number of people switching banks continues to grow, showing that customers are prepared to move banks to get a better deal. This is great news for competition in banking” said Andrea Leadsom, the Economic Secretary to the Treasury.
Britain’s competition watchdog could impose tougher measures, such as breaking up the country’s biggest banks if initiatives such as seven-day switching fail to increase competition sufficiently.
The country’s biggest four lenders – Lloyds Banking Group, Royal Bank of Scotland, Barclays and HSBC – control about 77 per cent of Britain’s current accounts, the Competition and Markets Authority said in a report last November.
The Payments Council, which is responsible for the account-switching service, published data which showed how many customers banks gained and lost during the second quarter of last year.
Santander attracted the most net new accounts, while Barclays and the Co-operative Bank lost the most customers.
Santander has benefited from the popularity of its 1-2-3 current account, which has appeared in a television campaign featuring golfer Rory McIlroy and Formula One champion Lewis Hamilton.
It made a net gain of 59,922 customers during the period. Halifax, owned by Lloyds Banking Group, was the second-biggest net gainer, adding 15,125 accounts. Barclays had a net loss of 22,119 customers during the period and the Co-operative Bank lost 19,103. Clydesdale Bank, which includes Yorkshire Bank, had a net loss of 7,838.
Co-op Bank lost customers last year after falling under the control of US hedge funds when a £1.5bn capital shortfall left it fighting for survival. The Payments Council said 69 per cent of Britons now knew about seven-day switching, up from 59 per cent at the end of 2013, and that growing numbers have confidence that the switching process works.
However, Which? executive director Richard Lloyd said: “These figures reveal that quicker switching alone is not enough to challenge the dominance of the biggest banks.
“We need to see much stronger reforms coming out of the Competition and Markets Authority investigation, to tackle the lack of competition and trust in the market. All banks should sign up to and promote the Government’s midata initiative to help people compare current accounts and see if it is worth switching.” In recent years, the Government has been keen for businesses to participate in the industry-led scheme, which will allow people to access their personal bill data in a portable form so they can switch to more competitive providers.
A spokesman for the British Bankers’ Association said: “We are really supportive of competition in the banking industry and we’re pleased there is a decent increase in the number of people switching.”
The spokesman stressed that the banks could do all the hard work to help customers switch and ensure the move was seamless. Bank account switching also helps new entrants to grow, which is important for a fair and functioning market, the spokesman added.
“It’s good for markets and good for competition,’’ the spokesman said. “You get banks wanting to stand out from the crowd.”