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Banks should prompt savers to switch accounts every two years

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With just 2% of current account holders switching annually, banks should prompt people to make the move every couple of years, a think-tank suggests.

During 2021, a total of 782,223 current accounts were switched, according to figures from

This means less than 2% of people switched current account and with these low rates, the Social Market Foundation (SMF) said it’s a “driver of detriment for personal and business customers in the banking sector”.

Customer switching here is also “significantly lower” than other consumer markets such as energy and telecoms, it added.

The think tank warned that low switch rates reduce the pressure to “improve customer service, offer higher returns on deposits, and offer more attractive overdraft terms”.

As such, it said higher switching rates “would improve financial outcomes for customers” and recommended that banks should be required to prompt customers every two years about their current account.

It suggested customers could either confirm they’re happy to continue with their current provider or they could be given the opportunity to re-evaluate if they’re better off switching.

As part of the ‘Banking on change’ briefing paper which looked at the impact of the pandemic on financial vulnerability, it said Covid-19 had been highly divisive and has increased the savings gap between higher and lower-income households.

It also widened disparities in financial resilience that were already significant across income groups in the UK.

The SMF stated that much of the financial impact has been deferred and questions remain about how households will fare now that furlough, mortgage holidays and eviction bans have been wound down.

It explored the role of banks and building societies in bolstering financial resilience, and providing support to vulnerable customers emerging from the pandemic, in light of the regulator’s ‘Consumer Duty’ proposal for lenders – a benchmark for standards of care towards customers.

The SMF said they hold vast amounts of data on income and expenditure so they can gauge financial distress and vulnerability, as well as offer tools and services to help.

Further, financial institutions also need to continue to do more to “empower customers to share their vulnerabilities” such as mental health issues or abuse from a spouse or partner, allowing banks and building societies to provide tailored support.

‘People stepped closer to financial vulnerability’

Scott Corfe, SMF research director, said: “Banks and building societies can do more to support vulnerable customers, but they need to think beyond their traditional product offer and create new reasons to switch. For people with limited deposits, the prospect of a higher rate of return on savings from switching bank offers little appeal.

“Yet these same customers could benefit from tools that can help them better manage their finances.

“Outcomes for financially vulnerable households could be improved, and more customers may consider switching provider, if banks compete more in the financial wellbeing space, rather than on conventional measures such as interest paid on deposits and overdraft rates.”

Jo Ainsley, senior service line manager, Pay.UK speaking for CASS, said: “It is very important that we consider the challenges people face when the things that previously may have been taken for granted change. One clear impact of the pandemic is how people stepped closer to financial vulnerability and there may well be more changes for people to think about in the coming year and beyond.

“The Current Account Switch Service makes changing a current account simple and easy, once people have considered if a new current account is best for them. The FCA Consumer Duty and the SMF’s assertion that banks and building societies are well placed to offer tools to their customers – and should compete in doing so – is a well-timed argument for greater differentiation across current accounts. We also welcome the idea of a ‘switch trigger every two years’, built in a way so people can see what other accounts are available to them to encourage people to consider switching.”

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