When will there be switch bonuses?

TheBanker

Zanderman said:

Bazzalona13295 said:

Zanderman said:

Bazzalona13295 said:

Ever so slightly off topic but how do banks make these switches pay? Especially as there are so many who use switches as a means to make money.

The purpose of the switching incentives is not, necessarily. to make them "pay" in any direct way. They are an initiative to gain market share and/or improve statistics (for a particular period) on market share.

So they are a form of advertising and, almost certainly, corporate target-keeping. Even if that target is only temporarily reached (as some people switch away again) or is illusory (as some people never really switch their main account).

Advertising budgets are huge. And difficult to fathom in cost-benefit terms.

It's all expensive, but how much new business does a series of television ads generate? A complete re-branding? A switching incentive scheme? All banks do at least some of these from time to time. Only the banks know (and some of that knowing will be guesswork) whether they are cost-effective.

I find it very interesting. Obviously market share is important purely because without any form of client base you're going to struggle, however its the statistical analysis which intrigues me.

When you talk about these potentially being temporary (which they certainly are in some cases to a greater or lesser degree) and in particular illusory, those are the benefits to me I don't fully understand.

Thanks for your reply though.

An increase in switched accounts, however temporary, enables a bank to declare, in its annual report, that XXXX number of people switched their accounts to us in 202X.  And that number may have been a pre-set target for the year, so is now a met target, and possibly even linked to director bonuses. The fact that it might only be temporary, or not actually main accounts, doesn't matter in that respect. 

But, as others have said above, on this forum we get a biased impression of how many switches are temporary or illusory main accounts, as this forum is frequented by many who are prepared to go to some trouble to maximise those switching incentives. 

Our experience on here is therefore also illusory - we are not seeing the whole picture, probably a mere fraction of what's actually happening. We have no idea of how many people switch their actual main account and then do actually stick with the new bank.  

For those who are interested, there's a lot of data about the number of switches here: https://www.wearepay.uk/what-we-do/switching-services/current-account-switch-service/current-account-switch-service-statistics/

The Quarterly reports, further down the page, are more interesting as they show the volume in and out per bank.

My experience having worked for a couple of banks who've run these offers is that most switchers do stick. The bank knows there are a group of people (who are referred to as either Carpet Baggers or 'The Martin Lewis Lot') who do the switching merry-go-round. But there are enough customers who stick around to make these offers worthwhile, especially if the customer goes on to open a paid-for account, takes out a credit card or applies for a mortgage. 

They know the same applies in the savings book where some people will stay for a few weeks/months then move their funds to whoever is paying 0.1% more, but others will become longer term customers. The Regular Savings accounts that pay high rates are loss leaders but they attract customers who are more likely to stick around.

Banking has changed. We used to try to market our accounts teenagers and students, knowing that people rarely switched so unless we really upset them we would have customers for life. A lot of people used to choose their bank based on there being a branch conveniently located near their home or workplace. And most people would have one bank where they'd hold most of their products. Maybe also a Building Sociery for savings or their mortgage. The Switching Service was introduced to increase competition and support new enterants into the sector. I don't think it was ever envisaged that the established banks would use it in the way they are, but it's good because it makes it easy for customers to switch.