“The big banks are able to trade off the relative inertia of their customer base, which is linked to their ‘loyal’ current account relationship and distribution model, ie, branches. Indeed, they tend to argue that customers ‘value’ a face to face branch service over rate,” the Aldermore spokesperson said.
Between December and August of this year, Aldermore increased its double access rate by 0.95 per cent to 1.70 per cent and increased its easy access rate by 1.10 per cent to 1.60 per cent.
The spokesperson said: “Smaller banks and building societies typically have a greater reliance on the retail savings market given that they don’t usually offer current accounts and have less access to wholesale markets.
“Newer banks, who tend to lead the way on rates, don’t have large savings back books so can offer higher variable rates without suffering large additional interest costs to existing savings customers."
Regulation
They also highlighted a lack of regulatory oversight as being an issue.
“For example, the SEAR (Single Easy Access Rate) initiative that was proposed, then shelved, by the FCA would have provided regulatory and reputational impetus to encourage both customer switching and higher rates from providers. This was a missed opportunity in our view,” they said.
The Financial Conduct Authority first published a consultation paper setting out proposals to simplify and improve competition in the cash savings market by introducing a Single Easy Access Rate in January 2020, but stopped working on the project during the pandemic.
It is understood that the FCA will continue to monitor the market and may revisit its priorities if significant harm to consumers is seen.
A spokesperson for the FCA told FTAdviser: “Firms must be transparent and fair with the rates and products they provide to customers, for example by notifying them in good time of disadvantageous rate changes.
“We will always look at the options available to us to prevent significant harm to consumers, and our new consumer duty will make sure firms are putting their customers’ needs first.”
jane.matthews@ft.com
