First Direct has increased its current account switching bonus to £200, in a bid to outshine its rivals and attract more customers. The move marks a £25 improvement on the bank's previous offer of £175, and brings it in line with the best cash offers from Natwest and Barclays.
The current account switching service, which allows customers to switch their current account to a new provider within seven working days, has been available since 2013. It was introduced by the Payments Council, a trade organisation that represents the UK's payments industry, with the aim of increasing competition and improving customer service in the current account market.
First Direct's decision to increase its switching bonus is likely to put pressure on other banks to follow suit. The bank's parent company, HSBC, has faced criticism in the past for its relatively low switching bonus, and the move is seen as a bid to boost its market share.
According to a recent survey by the Current Account Switch Service, the number of switches to new providers has increased significantly in recent years, with over 4 million switches recorded in 2022 alone. The survey attributed the rise in switches to the growing number of challenger banks and the increasing competition in the market.
The move by First Direct is also seen as a response to the growing pressure from the UK's Financial Conduct Authority (FCA) to improve customer outcomes in the current account market. The FCA has set out a range of proposals to increase competition and improve customer service, including a requirement for banks to pay a switching bonus to customers who switch to a new provider.
The opposition parties have welcomed the move by First Direct, with the Labour Party's Shadow Chancellor, Rachel Reeves, stating that the move was a 'positive step' towards increasing competition in the market. However, the Liberal Democrats have called for more to be done to increase competition and improve customer outcomes, with their Shadow Chancellor, Christine Jardine, stating that the move was 'just the tip of the iceberg'.