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Digital first banks were among the highest ranked financial institutions in new surveys commissioned by the Competition and Markets Authority (CMA); however, data suggests it has little impact on customer switching habits.
UK challenger banks Starling and Monzo were the big winners following two satisfaction surveys looking at service quality among personal and business current account holders.
The consumer survey, conducted by Ipsos, looked at the quality of a range of services offered by 16 of the largest personal current account providers in Great Britain and 11 in Northern Ireland.
For overall service quality, Starling and Monzo were tied for first place, followed by First Direct (a subsidiary of HSBC), Metro Bank and Nationwide respectively.
Proportionally, these banks had the highest number of customers who said they are “extremely likely” or “very likely” to recommend their provider to a friend or family member.
At the bottom of the table, TSB, Virgin Money and Royal Bank of Scotland were the lowest-ranked banks for overall service quality.
Starling and Monzo also topped the charts for service quality in the online and mobile banking sub-category, while First Direct took the top accolade for overdrafts.
Challenger bank, Metro Bank — famous for its dog-friendly branches — was rated highest for in-branch services.
Meanwhile, a second survey conducted by BVA BDRC asked similar questions to customers of business banking providers in Great Britain and Northern Ireland.
Again, Starling and Monzo were leaders of the pack for overall service quality, ranked number one and two respectively, followed by Sweden-based Handelsbanken, Tide and Metro Bank.
Starling, Monzo and Tide also won out on the quality of their online and mobile banking services, while Starling and Monzo came in at number two and three for relationship and account management quality.
Low switching
Both surveys were conducted as part of a regulatory requirement imposed by the CMA.
Following an investigation into the retail banking markets in 2016, the CMA implemented the Retail Banking Order, making it compulsory for all relevant banks to take part in the two surveys above.
The surveys are conducted and updated every six months and they aim to give potential customers a tool that they can use to compare different providers.
They are also designed to promote competition between providers, with the hope that this will lead to higher quality services across the board and encourage customers to shop around.
As per the Retail Banking Order, providers must display their survey ranking “prominently” both in branch and on their apps and websites.
The order follows other initiatives to improve competition and encourage switching, coming on the back of the launch of the Current Account Switching Service (CASS), which launched in 2013.
However, evidence suggests these initiatives have had relatively limited success.
According to Pay.UK there have been a total of 8.2m switches since the service launched in 2013, or roughly 800,000 switches per year.
For example, there were 782,000 account switches in 2021, which based on the number of UK current account holders is a rate of just 1.5 percent. Effectively, this means banks have an annual retention rate of 98.5 percent.
Banks will gain and lose customers outside CASS, but this highlights the inertia among bank customers to switch banks and suggests that customer service ratings play a relatively small role in the decision to switch banks.
For example, NatWest was the biggest winner in terms of customers switching to its bank in Q1 2022, with new gains of 19,464 customers according to Pay.uk.
Despite these positive numbers, NatWest was in fact ranked ten out of 16 banks among consumers in terms of overall satisfaction.
A likely reason for NatWest’s strong comparative performance is the £150 incentive it is currently offering to encourage people to switch, suggesting incentives play a significant role in attracting customers.
Meanwhile, despite its strong customer satisfaction, just 3,221 customers used CASS to switch to Monzo bank in Q1 2022.
Starling gained 11,888 new customers in Q1 2022, the third best performing bank.
