Many challenger banks have seen an influx in customers in recent months as clients abandon high street lenders because of their low savings rates.
High street banks have come under attack from regulators and lawmakers for offering “measly” rates on easy access savings accounts. The five largest banks – HSBC, Natwest, Barclays, Lloyds and Nationwide – offer rates between 0.9 per cent and 1.75 per cent.
The influential Treasury Committee has repeatedly drawn attention to the low rates on offer at the high street banks.
Harriet Baldwin, chair of the Committee, has accused the major lenders of failing in their “social duty” to encourage saving while fellow member Angela Eagle said banks were “blatant(ly) profiteering”.
However, many of the challenger banks in the UK offer much higher rates. Monzo, Revolut and Starling all offer rates of 3.25 per cent or more, with Atom Bank offering 3.95 per cent on easy access accounts.
The better rates have attracted more and more customers to the challengers.
Atom Bank saw an 82 per cent increase in its customer base in the year to March, with the bank suggesting much of that increase was linked to its savings rates.
Meanwhile Monzo has seen 800,000 customers open an instant access savings account since launching in February.
Mark Mullen, chief executive at Atom Bank, said: “the best way to stop them (high street banks) profiting at the expense of customers is to encourage people to get online, vote with their fingers and move their hard-earned money to a better rate.”
“We think savers should be getting paid, not played by their bank,” he continued.
Meanwhile Chase UK, which offers a rate of 3.8 per cent, said its customer numbers had tripled since May last year reaching 1.6m customers. Many were attracted by the competitive savings rate.
Ford Money, which offers 4.25 per cent on its easy access account, has taken on 34,000 new customers this year. Will Davies, chief deposits officer at Ford Money, said that the rates at large banks were as exciting as “watching paint dry”.
Yet another challenger said its savings balances had increased by around 50 per cent in the past six months, with anecdotal evidence suggesting customers were leaving high street banks to choose better rates.
While challenger banks have been pulling in the customers, the bosses of the high street banks have been summoned to a meeting with the regulator on Thursday to discuss savings rates.
A range of proposals have been suggested – including a ‘savings charter’ to mirror the mortgage charter signed last week – but City AM understands the regulator is not pursuing any specific outcome.