Are Bank Switching Bonuses a Benefit to Banks?

Cotta

Hi All,

Are bank switching bonuses a benefit to banks? It usually seems to be the same banks who offer this bonuses whilst others can get along without needing to reward customers for switching. On the last point are we likely to see any new players in the banking world getting involved with the switching reward process this year?

castle96

Hope so ! Done all the rest

eskbanker

Cotta wrote: »

Are bank switching bonuses a benefit to banks? It usually seems to be the same banks who offer this bonuses whilst others can get along without needing to reward customers for switching.

It's just a cost of doing business - different banks will have different marketing and customer acquisition strategies, so some will choose to throw money at switchers up front, others will offer decent interest or other benefits, some will spend more than others on advertising (across varying channels according to target customer demographic, etc), some will promote their customer service reputation (warranted or not), etc, etc.

In itself it's a loss-leader but obviously these commercial organisations aren't altruistic enough to want to give away money without getting something in return, so they'll clearly be expecting at least some switchers to stick with them and earn them revenue from fees/charges and/or other products.

Meanwhile the MSE bubble is populated by ruthless switchers and savers (including yours truly) who can and do exploit all such offers without giving the banks any opportunity to recoup such expenses, but if we were typical of most of their customers then they would think more carefully about how to attract and retain business!

The quarterly switching statistics published by BACS generally show some sort of correlation between offers and switchers, as ought to be expected, but the percentage of accounts being switched remains very low in the general scheme of things (about 1-1.5% per year), so don't be swayed by the disproportionate level of coverage on here!

18cc

I would agree with ESK banker - although it may seem from this forum that the whole world is taking advantage of switching bonuses and then moving away as soon as they can I'm sure that is not the case and that the vast majority of people who switch for the bonus probably stay at least for some time with the bank they have switched to and thus it is possible for the bank to earn some money from them

Cotta

I think that's a good point in relation to the assumption from MSE that everyone is switching while in reality this is far from the case.


There are some banks which don't seem very competitive in terms of their products but also don't offer switch incentives such as Sainsbury's bank and I do wonder what draws people to them?

eskbanker

Cotta wrote: »

There are some banks which don't seem very competitive in terms of their products but also don't offer switch incentives such as Sainsbury's bank and I do wonder what draws people to them?

https://www.sainsburysbank.co.uk/jobs/aboutus suggests they're pitching to their loyal supermarket customers (who account for about 15% market share) and the heavily-overlapping population of Nectar card holders:

We're proud to be the UK's first supermarket bank and we're proud of our heritage.

Sainsbury's was the first major supermarket to open a bank in the UK in February 1997.

Sainsbury's took 100 per cent ownership of Sainsbury's Bank in January 2014.

We offer an award-winning range of financial products with attractive rewards for Sainsbury's shoppers. This includes credit cards, savings and loans, as well as mortgages, travel money and car, home, pet, travel and life insurance which we provide online and by telephone.

We have travel money bureaux at various Sainsbury's supermarkets across the UK and a large ATM estate.

Travel money can also be ordered by phone, online and delivered to your nearest Sainsbury's travel money bureau or to your home.

We aim to offer Sainsbury's shoppers great deals and rewards for choosing to shop and bank with us. Nectar card holders receive additional points and preferential rates across a range of products.

deadendwaterfall

I wonder if one day one of the banks will surprise us with a whopper of a switching bonus of say £1000 but make meeting the criteria for it notoriously tough to meet?

Harvic

Completely agree with above, this is a small bubble of self-selected people! I've managed to accumulate over £500 in switch rewards and 'refer-a-friend' offers this year.

Switched to HSBC (who my wife had over £8k sat earning 0% interest with) attracted £150 and further £50 later in the year- with a 5% regular saver. She couldn't believe that they would pay £200 for nothing essentially and didn't know how they could afford it... she didn't like the explanation that for every 1 switch savvy customer there is probably 50 people like her sat earning me interest while they earn 0% for their own hard-earned cash.

My father has held his bank account with the same bank for over 60 years and thought it was 'unethical' for me to get money for switching when I have no intention to use it for anything other than high interest monthly saving and switch rewards. We have different opinions on banking ethics not least because he banks with one of the banks bailed out in 2008 that will no doubt never repay their debt to the British people...

Cotta

deadendwaterfall wrote: »

I wonder if one day one of the banks will surprise us with a whopper of a switching bonus of say £1000 but make meeting the criteria for it notoriously tough to meet?

You have to pay in £10k per month and have 27 direct debits.

YorkshireBoy

Cotta wrote: »

You have to pay in £10k per month and have 27 direct debits.

I'd need around a month to set the DDs up, maybe less, so not insurmountable.

The last time I made that kind of money in one go was with 11 switches, at £150 each, to Yorkshire Bank. Bring it on!

Zero_Sum

Cotta wrote: »

You have to pay in £10k per month and have 27 direct debits.

Providing the £10k doesnt have to be in one go & the DD's arent individual mandates, ie you can just set a daily DD with the post office. That would be fairly easy to achieve.