Tesco Bank Struggles With Switching

Tesco stops all customer account switches after being inundated with requests

August 11, 2021
Tesco Bank Struggles With Switching
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Tesco Bank has temporarily banned customers from using the Current Account Switching Service after it was inundated with requests following the news that the bank was closing all current accounts by November of this year.

Around 250,000 customers were told last month that they would need to find a new bank as Tesco Bank was stopping its current account offering, which has resulted in many of them moving quickly to try and move their finances.

As a result, Tesco Bank has a backlog of requests to deal with and has temporarily frozen the switching service. Customers have taken to social media to complain about being unable to use the CASS to find a new bank.

A Tesco Bank spokesman has confirmed that this is a conscious decision to pause the service and not a glitch and that it was due to the high demand that was causing the delay. It will be reactivated once the backlog has reached manageable levels.

We are working closely with Tesco Bank as they seek to resolve the issues some of their customers have had as they try to switch to new current accounts.

Those customers will benefit from the Current Account Switch Service guarantee, which means their new bank will switch their payments and transfer the balance, and their old bank will take care of closing the old account.

Tesco Bank Accounts Closure

In July, Tesco Bank wrote to its current account customers to inform them that they would be closing the accounts in November. The bank had previously stopped taking applications for new accounts in December 2019, having first started offering them to customers in 2014.

The bank estimated that only 12% of customers were using the bank as their primary current account, with others treating it as a pot for savings or budgeting, or leaving the account dormant.

It Is a continuation of the struggles that supermarkets have had when trying to enter the banking market. Already Tesco Bank had sold its mortgage book to the Lloyds Banking Group in 2018 for almost £4 billion, saying that challenging market conditions had resulted in it abandoning the sector.

The bank intends to remain open for other financial products for now.

Starling A Popular Destination

The closure of Tesco’s current accounts will see customers deciding which bank they wish to switch to, and early indications are that Starling Bank may be one of the biggest beneficiaries.

In the first three months of 2021, Starling had the largest net gain of customers, with 18.874 new customers and only 1,105 customers lost, giving a net gain of 17,769.

Very close behind was Virgin Money, which had a net gain of 17,495 in the same period.

With Tesco Bank and also M&S Bank closing current accounts, customers are considering their options and many are clearly interested in newer digital challengers, and not just the traditional high street options.

Ian Lewis
Ian Lewis
Ian is an experienced writer with 15 years’ experience working in journalism and marketing. He’s worked in-house in financial institutions as well as writing freelance pieces for a variety of banking and financial trading websites.

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