The Current Account Switch Service was launched to encourage more people and businesses to shop around for different banks, but SMEs are not so interested, as Andrew Fawthrop reports
Paymentology aims to improve the card payment process (Credit: Sean MacEntee via Flickr)
Switching current account providers has not always been something UK banking customers have done with great regularity – although the Current Account Switch Service is tasked with encouraging greater mobility within the market.
What is the Current Account Switch Service?
Since it was launched in 2013, the scheme has facilitated over 5.3 million switches of both personal and business accounts.
Yet despite a concerted effort by regulators and the organisation that runs it, small business customers – a group specifically targeted by the scheme – have not been flocking to use the Current Account Switch Service (CASS).
Figures from Bacs, the payments organisation run by Pay.UK and tasked with operating CASS, show that while the scheme has attracted decent numbers – between 60,000 and 100,000 switches per month during 2018 – the vast majority of these have been for personal accounts.
Business bank switching accounted for between only 2.5% to 4% of all monthly account switches throughout 2018, with similar levels posted for 2017.
Paul Horlock, CEO of the retail payments authority Pay.UK, says: “When it comes to the numbers of people or SMEs switching, there are many factors at play – high levels of satisfaction with the existing bank, and a reluctance to move away from the familiar.”
Current Account Switch Service advertising campaign results in personal account changes
An overhaul of CASS was initiated in January 2017 after a Competition and Markets Authority (CMA) review found more should be done to motivate individuals and SMEs to shop around frequently.
There was an expensive marketing drive to increase public awareness of the scheme, with TV and radio commercials and a social media campaign guaranteeing smooth and stress-free switchovers.
The CMA also promoted data showing businesses could save an average of £80 per year by regularly swapping out their banks.
But Mr Horlock believes more work needs to be done to target SMEs.
He says: “Once a consumer, or business, has decided which bank or building society to move to, our role is to make it easier for people to switch and to drive competition in the market, so that current account providers make moving to them more attractive.
“Our figures show that nearly eight in ten people are aware of the Current Account Switch Service, while the satisfaction level among those who have used it stands at over 90%.
“However, we continue to work hard to build on these levels and last year saw the service target the SME market as part of a wider, extensive multi-million-pound communications campaign, crossing TV, cinema, radio, digital and social media, developed specifically to raise awareness.”
Awareness of the Current Account Switch Service for businesses is low
Research conducted by UK financial consultancy Charterhouse Research – recently rebranded as Savanta – in 2018 found that a simple lack of awareness was a significant factor in why participation in CASS has been so sluggish among businesses.
Its Business Banking Survey canvassed more than 2,000 SMEs with a turnover of up to £6.5m to gather their views on CASS, and whether the scheme would impact the likelihood of them moving to a different current account provider.
More than half the businesses questioned had either never heard of CASS, or had heard of it but thought it was only for personal accounts.
Only 17% of firms said they were aware and knowledgeable about CASS for SMEs.
When broken down by age and gender factors, older male business owners were more likely to be broadly aware of CASS than their younger, female counterparts.
Regionally, awareness was highest in London and Midlands and lowest in the South East of England.
In Scotland, more than a third (35%) of businesses had never even heard of CASS.
SMEs need a ‘push factor’ to engage with the Current Account Switch Service
The biggest barrier, according to Charterhouse’s survey, to greater participation in CASS by businesses is the lack of any “push factor” – meaning companies are satisfied enough with what their bank provides, and have no great urge to jump ship.
A perceived lack of significant variation between the major retail banks and the products they are offering to businesses also means people are less likely to feel compelled to leave their existing provider behind for a new one.
So, despite CASS offering a simple, money-saving way to swap one lender for another, it seems there is simply no great appetite for change among small businesses.
CMA league tables
One reason that may tempt a company to look for a new current account provider is the quality of the customer service it receives.
To raise awareness of how different banks compare in terms of their customer satisfaction levels, the CMA last year introduced new rules requiring lenders to publish data about how likely their users are to recommend them to friends, relatives or other businesses.
The result was the publication of new league tables, which rank UK retail banks based on their customer service referral score – with one table for personal accounts and one for SME business accounts.
Top of the table for business banks when the first set of tables were released last August was Handelsbanken, while Royal Bank of Scotland brought up the rear.
Speaking about the league table last year, CMA senior director Adam Land said: “For the first time, people will now be able to easily compare banks on the quality of the service they provide, and so judge if they’re getting the most for their money or could do better elsewhere.
“This is one of the many measures – including open banking and overdraft text alerts – that we put in place to make banks work harder for their customers, and help people shop around to find the best deals for them.”
Open banking could fuel interest in the Current Account Switch Service
The spread of open banking in the UK is another factor likely to affect how often customers choose to switch banking providers.
Challenger banks like Starling and Revolut are already offering business current accounts, while industry darling Monzo has today announced its own first steps into the space.
As digital disruption gathers pace in the banking industry, and challenger banks become more well-known and trusted, it seems likely that SMEs will become more receptive to the idea of switching their account providers.
Savanta director Mark Dennis believes the confluence of the three initiatives impacting upon consumer habits in the current account market – CASS, the CMA league tables and open banking – will begin to have an effect in the coming years.
He adds “The current position is there are three new initiatives designed to disrupt the existing inertia.
“Awareness of each is low at the moment and switching generally only occurs when there’s a specific ‘push factor’ such as a refusal of credit or some other serious conflict or error.
“However, with the existing rate of switching so low, in my view the three initiatives occurring together and slowly building awareness are likely to result in an increase in switching over the next two or three years, as long as the organisations charged with promoting each initiative continue to keep the momentum going.”