Why it’s time to ditch your high street bank

Just make sure you jump the right way

In June 2018, Eindhoven University of Technology announced plans to build the “world’s first” habitable 3D printed houses (Shutterstock)

We are living in an age of innovation. We have robot vacuum cleaners, we can use 3D printers to help build homes, and a company called Gravity has genuinely created an actual jetpack suit that lets you fly.

Yet when it comes to bank accounts we don’t even switch for better customer service, let alone for the rapidly evolving services now on offer.

We’re getting better at switching, no doubt – and that in itself is down to innovation. The innovation that is the Current Account Switch Service has boosted the number of bank account customers who make the move to a new account.

The Switch Guarantee means the new bank or building society will switch your account for free, move all your payments from the old account to the new one, transfer your balance, redirect any payments that go to the old account and refund any fees that are charged as a result of the switch.

No, there are no jetpacks involved, sorry. But it has made it easier to move. More than 5.6 million people have now changed banks through the switching service.

But it’s still only a fraction of the number of people who could make the switch. Back in February, the Competition and Markets Authority stated that only 3 per cent of people bothered switched bank accounts in any one year.

“For too long, current account customers have been unclear about whether they have been getting a good deal from their bank and whether they could get a better deal elsewhere,” said a spokesperson.

Yet customers are apathetically sticking with their high street banks and building societies, even as they depart the high street. Data from the consumer charity Which? published last year revealed the the UK has lost nearly two-thirds of its bank and building society branches in the last 30 years.

Alongside the changing face of high street retail banking and the changing face of switching, there’s another change. A rise of challenger banks offering an alternative to the mainstream options.

They don’t have physical branches, but neither do many people banking on the high street.

Challenging times

Challenger banks are typically digital-only, using apps as a shop front and appealing particularly to younger generations who are used to life with a smartphone.

There is a surprising number of challenger banks, and many of them specialise to benefit a targeted group of customers.

For example, Starling Bank provides app-enabled notifications whenever money comes in or goes out of the account, as well as access to spending habit insights so that customers can better understand their budgeting.

Coconut offers a current account specifically designed for freelancers and the self-employed that combines banking and accountancy in one product.

Monzo Bank promises human help whenever needed but also the chance to set monthly budgets for different areas of spending, such as groceries or going out, as well as notifications if too much money is leaving your account and the option to save spare change into a separate pot automatically.

Revolut has faced some difficult news stories recently, but it remains a hugely successful challenger with more than 5 million people making the switch to it in order to spend or transfer money abroad without paying high charges.

Different accounts, different perks, different rates. It’s about finding the right fit for you.

Innovate or die

High street banks are innovating, of course. The challengers stole a march on them but some are now rapidly upgrading their offering to customers.

That innovation is necessary. The Deloitte 2019 Banking Industry Outlook warned that customers’ smooth experiences elsewhere risk making banks that don’t innovate fall behind.

“Consumers’ experiences in other industries are upping the ante for most banks,” it reported. “Deloitte’s recent global digital banking survey across 17 countries showed that banking consumers have a stronger emotional connection to technology brands like Apple, Amazon and Google than to their banks.

“Some of these companies’ ability to blend experiences from the physical and digital worlds is considered a good model for banks.”

Yet high street banks have a key significant advantage over their newer, potentially more nimble competitors.

Recent research carried out by banking and payments solution provider Contis revealed that UK customer trust in the high street banks is twice that of challenger banks.

Flavia Alzetta, CEO of Contis, said: “There is a legacy of trust for established high street banks, but our research shows that time is running out. Established banks need to quickly embrace the innovations pioneered by challenger banks, which are fast changing the expectations of consumers.

“The winners will be the companies that listen to customers and deliver choice. High street banks need to listen and innovate, or die, and time is of the essence.”

Compare, contrast, conclude

For a customer who is ready to switch to find a better banking experience and better deal, there’s never been so much choice.

However, it can’t be assumed that the digital challengers have the best products any more than it should be taken for granted that the high street banks and building societies will.

A bank account is a highly personal product and factors such as whether you use an overdraft, whether you want to speak to a human, whether you want any innovations – such as your spending money to be held separate to bill payments.

Switching is not an effort these days but nor is it something you will want to do regularly. So take your time, make careful comparisons, find the right account and then make the switch.