Next Bank Promotion

You may be right. A new player in the current account market would potentially shake things up. Starling Bank has done that to some extent, although its offering is more focused on customer experience, rather than financial gain (a noteworthy exception being their fee-free - Mastercard rate - overseas spending).

It may be that other banks reduce the interest rate they offer on their current accounts too. Tesco are committed to paying 3% until next April, but after that the rate may drop. TSB could reduced their 3% rate, but as the maximum balance on which it is available is low (£1,500) I think that may be more sustainable. Nationwide have already closed the loophole allowing people to get the 5% rate for more than 12 months on a FlexDirect account. This may cause them some loss of customers over the medium term, although the continued availability of a linked 5% regular saver is an incentive not to leave.

I suspect that switching incentives will continue to be offered with banks offering them from time to time, but generally excluding existing customers and those who have previously received a bonus. Some may even follow First Direct's lead by excluding from the bonus anyone who has ever been a customer in any form. The churn generated by mass switching could be a diminishing return for the banks and their interest in generating such large volumes of switchers, who then jump ship weeks later, may be waning.

What I don't think likely is that banks will give up on trying to entice customers in. Linked regular savings accounts are an obvious boon in this regard, as they tie the customer in for a period of time. The rate needs to be attractive, however, and the maximum deposit a reasonable size. While some will be attracted to accounts offering regular savings interest rates of 2% plus, I have little interest in such low rates and would be looking for 5% as a minimum. Partly, your attitude to such accounts depends on the size of your cash holdings, and your level of aversion, or wariness, to investments.

RG2015 wrote: »

Thank you for the information. I have checked online and found out some more.

I am not enticed by app only bank accounts but if the VM Universal account included full online functionality and a decent app that would suit me. The suggestion of partitioning the account is intriguing but not the sort of USP to hook me in. I just wonder if they may come in with something more innovative.

There's some meaningless guff from the CEO about, "personalised accounts". What that actually turns out to mean remains to be seen. I doubt it will be all that interesting.