Like the rain that falls from the sky the COVID pandemic has not impacted everyone equally.

This statement is especially true when it comes to the impact COVID has had on the needs of financially vulnerable customers.

Last week Pay.UK, the operator of the UK’s Current Account Switching Service, held a webinar that centred on whether the pandemic has changed the needs of financially vulnerable consumers when choosing a current account.

It is clear that the COVID pandemic has had a significant impact on the number of consumers switching their bank account as just 777,000 switches were completed over the last twelve months. More: Northey Point blog: Q3 2020 Current Account Switching Service.

In a rare glimpse behind the numbers Pay.UK’s webinar provided a chance to understand some of the factors that are driving whether or not we choose to switch our bank account.

Supply Factors

A number of supply factors have possibly led to a reduction in account switching activity:

During Lockdown 1.0 a number of financial switch reward offers were withdrawn by banks although as the year has progressed financial switch incentives appear to be returning albeit at lower levels.

Personally, choosing to switch your bank account based solely on a (relatively) small one off financial incentive would seem a short sighted decision to influence who to choose to help you manage your financial needs.

In general bank complaints raised with banks have fallen in 2020 – that said, it maybe that COVID has impacted our desire or ability to raise a complaint with our bank!

During 2020 the banks have implemented the FCA overdraft support package which may have reduced dissatisfaction with overdraft charges and, perhaps, resulted in less charging differentiation in the market place.

Branch closures are often a trigger to switch a bank account but these have slowed in 2020.

Pay.UK’s research suggests that the above supply factors appear likely to have driven the levels of switch levels.

Attitudinal Factors

The consistently high Current Account Switch customer satisfaction factors have held throughout the pandemic period demonstrating that trust and happiness in the switching scheme promise have endured.

Vulnerability Factors

Pay.UK’s research shows that for consumers in vulnerable situations, the role of an overdraft facility plays a crucial part in the decision on whether or not to switch a bank account.

Whether or not an overdraft facility at least as good (amount, terms and charges) is an important factor. Checking whether you are eligible for an overdraft on at least the same terms is something that needs to be checked before commencing a switch of your bank account.

The research conducted brought out this vulnerability factor particularly among gig workers who have been hit harder financially but, interesting, appear more likely to switch than any other group.

Negative associations turn positive with age

Younger people appear to be more negative towards switching their bank account but, when they do, are more likely to be attracted to switching offers.

However, for the UK’s digital natives, freebies, mobile apps and low overdraft charges are the switching factors that appear to make a difference.

Are you satisfied with your bank?

Three times as many SMEs have been satisfied than dissatisfied with the COVID-19 support available from their bank or building society.

For Small and Medium Enterprises good digital services and access to a relationship manage have become more important decisions when selecting a bank during 2020.

More: Northey Point Blog – Are you satisfied with your bank?

Conclusions

A number of factors have played a part in driving the levels of account switching in 2020.

The significant drop in switches during Lockdown 1.0 appear to be recovering but the levels still remain below that of the pre-COVID levels of switching.

More: Northey Point Blog: Current Account Switching Service.

I’d argue that we don’t need to worry about the drop in 2020 switching levels as the pandemic provisions have removed some of the normal trigger switches and there have certainly been less opportunities to conduct ‘drop in’ switches during the lockdown periods – although it is clear that the ‘app only’ challenger banks have benefited from the High Street lockdown.

Blog High Street – Northey Point: Switching Tracker.

As the operator and the guardian of the Current Account Switching Service when it launched back in 2013 I was adamant that the number of switches that occurred wasn’t the most important measure of success.

For me, the mere existence of a switching service that was known, trusted, delivered its promise and achieved high confidence and satisfaction rates were the most important success factors.

CASS would be just as successful if it acted as a catalyst for banks to ‘pull their socks up’ to keep customers and not trigger a switch. This, combined with a service that allowed a smooth and hassle-free switch when needed, provided the success ingredients by which the service ought to be measured – not just the absolute number of switches.

As consumers there are many positive and negative factors that would cause us to switch our banks accounts – whatever these are I encourage you choose your bank for a relationship that helps you manage your finances not just a £100 switch incentive.

Over the next month the way that banks deliver customer service post payment holidays and other COVID provisions (such as overdraft facilities) will be important regarding banks retaining their customers as forbearance provisions and other areas of support come to an end.

If banks don’t handle the predicted challenges that consumers will face over the coming months there is a real risk that customers will choose to switch out and move to another bank.

One more thing

The launch of a Current Account Switching Service was seen as an alternative to sort code and account number portability but is there a risk that the regulators will revisit the requirement for our sort code and account number to be just as transferrable as our mobile phone number?

In the past I may have centred my argument on questioning what being able to transfer my sort code and account number from one bank to another would provide over and above the provisions of the excellent switching service.

Whilst this argument is still very valid and fact that the Current Account Switching service has readily been proved beneficial over the past seven years I think the argument has moved on.

Just as we don’t need to remember our mobile phone number anymore being able to quote our sort code and account number is no longer the key or passport to accessing our bank account.

The landscape has changed, nobody recognises that my Barclays Bank account number is in the ‘staff account number range’, the cheque book proudly displaying my account details in the MICR line is an historic artefact and my debit card is an un-embossed piece of plastic.

In an app based environment, with the prevalence of digital payments, Open Banking payments being developed and the emergence of a range of payment overlay services all my sort code and account number does is to serve as a pointer to a ‘base bucket’ where monetary value is served.