Monzo and Starling have been poaching customers from major high street banks - Business Insider

In Q3 2019, Monzo and Starling gained 13,453 and 6,686 net current account customers, respectively, while several major banks reported negative numbers, including Halifax , Barclays , Lloyds , and RBS . But the news hasn't been all bad for incumbents, as Nationwide added 26,466 customers and HSBC gained 15,782.

The neobanks' spike in account switchers has been growing stronger over the last five quarters. In Q3 2018, Monzo gained 2,702 customers, while Starling added 1,737 — and the number of account switchers gravitating toward each neobank has increased in each subsequent quarter up to now.

The incumbent banks that are adding customers may be doing so by luring them in with cash incentives. While most incumbents are losing account switchers, HSBC and is adding customers, as is NatWest, which gained a net 37,663 current accounts through Cass between January and September this year, according to Cass figures One thing both banks have is common is that they've been offering cash bonuses to customers who switch to using their accounts — as much as £175 in NatWest's case.

However, using bribes to draw new account holders is costly and is likely to pull in customers with low brand loyalty. Paying $225 per customer is certain to damage profit margins and is likely a strategy that only large incumbents like HSBC or NatWest can undertake for any serious amount of time. A severe risk, however, is that if customers can be simply lured away by a cash incentive, they may not be likely to stick around with any one bank long enough to be worth the cost. And given that there are services like Cass in the UK that make it easy for consumers to switch their current accounts, customers with little loyalty to their bank have few obstacles to stop them from hopping to a different bank offering a better promotion.

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