Lloyds and Starling placed first and second, respectively, in receiving UK current account switchers during Q4 2020 by taking markedly different approaches with incentives, per AltFi. The data comes from the Current Account Switch Service (CASS), a free service that makes it easier to switch current accounts—which are similar to checking accounts in the US—and business accounts. CASS figures indicate that there were 704,560 account switches in the UK throughout 2020—a drop of approximately 300,000 from more than 1 million in 2019, likely caused by the coronavirus pandemic. However, Q4’s performance indicates that account switching is bouncing back, closing with a crisis-era high of nearly 190,000.
Lloyds Bank and Starling Bank both achieved success despite following different strategies for incentives:
To win the account switching battle and retain new customers, banks need to offer strong user experiences or incentives. Neobanks performed well in Q4, taking three of the top six CASS spots, according to This is Money; in contrast, all of the laggards were traditional banks. Digital banking offerings and customer service were cited more frequently than incentives as reasons for switching, which is consistent with Boden’s explanation for Starling’s success. However, the two worst Q4 performers were incumbents that slashed interest rates on popular account offerings: TSB, which lost 20,236 accounts, and Santander, which shed 18,270. These results suggest that while incentives aren’t necessary to win the account switching battle, as indicated by Starling’s success, banks that seek to entice new customers through benefits need to maintain those offerings—or they’ll risk significant customer attrition.