Banks have been investing increasing amounts of time and money into targeting potential personal current account customers with an array of incentives.
Can banking incentives change the way the public views the personal banking services market?
Why Incentives are Introduced
In 2008, the Office of Fair Trading (OFT) published a report that highlighted both low rates of switching between current accounts, and low levels of public understanding regarding the complexities of interest rates and overdraft facilities.
In light of these findings, the OFT announced a campaign, launched in July 2012, to address the issues.
It is expected to continue until 2014, and aims to increase levels of competition between banks by making the personal account sector more consumer-focused.
The OFT also plans, in time, to turn its attention to the business account market.
UK Consumer Banking: Market Responses
Promotional campaigns are targeting personal current account customers with incentives such as cash back, 0% overdraft rates, high interest rates on accounts in credit, and even debit cards personalised with a photograph chosen by the account holder. In addition to the traditional, well-established banks increasing their allure for new customers, several retailers have broadened their range of financial services, realising the potential of banking as a customer-driven sector. For example, clothing giant Marks & Spencer this summer launched a current account aimed at regular customers, revealing plans to open banking branches in several of its stores. On opening the first in London in July this year, executives of the chain predicted that fifty such in-store banks would be open in Marks & Spencer branches across the UK by the end of 2013.
With the OFT plans set to spark a government reform on the issue of switching current accounts – with the ultimate aim of making this a less daunting and confusing prospect for account holders – other major retailers, such as Tesco, are rumoured to be considering their own range of current accounts, to be launched in 2013, when reforms are expected to have begun making an impact on consumer behaviour.
With the majority of supermarket conglomerates already offering financial products such as personal loans, insurance, and credit cards, personal banking is, perhaps, the next logical step and will, as is the purpose of the OFT campaign, put pressure on long-established banking institutions to offer better, more transparent deals to customers.
Decoding Science. One article at a time.