A pedestrian carries an umbrella while passing automated teller machines (ATMs) outside a Royal Bank of Scotland Group Plc bank branch in London, U.K., on Wednesday, Feb. 15, 2017. RBS is preparing to cut more than 1 billion pounds ($1.25 billion) of annual operating costs by eliminating jobs and closing branches as it seeks to bolster profitability, said a person with knowledge of the plans. Photographer: Luke MacGregor/Bloomberg
RBS is required to offload at least 120,000 out of a pool of 220,000 customers by August © Bloomberg

Royal Bank of Scotland’s rivals are failing to capitalise on an opportunity to poach some of its business customers, with the latest figures showing that only one in 10 account holders eligible for incentives to switch bank have done so.

RBS is required to offload at least 120,000 out of a pool of 220,000 customers by August, as a condition of its government bailout more than a decade ago. However, only about 23,000 businesses agreed to switch in the 10 months to December, according to several people briefed on the figures.

The government-designed switching scheme is aimed at reducing RBS’s dominance in the business banking sector.

RBS, the UK’s largest business bank, had to stump up £350m, which rivals can use to provide special offers for small and midsized businesses that agree to transfer their current accounts or loans.

About 4,600 businesses used the scheme in the last three months of 2019, a quarter-on-quarter decline of more than 20 per cent.

Bankers blamed Banking Competition Remedies, the independent body set up to manage the scheme, for not doing enough to encourage customers to move. “Customers are being offered some great deals but, even so, much more energy needs to go into persuading them to leave RBS,” said one person who worked on the programme at a challenger bank. 

Some customers suggested that extra advertising from BCR would not be enough to make a difference, as the “dowries” on offer were simply not good enough. 

“I have recently checked the online options — but there is not one bank that offers me what I currently have with RBS,” one small business owner said. “The only potentially feasible option from the offering included going ‘app only’, which is just one step too far for me.” 

Godfrey Cromwell, BCR chairman, said: “The number of switches since the scheme’s inception continue to represent a significant increase in historic switching rates for this sector. The pace of account transfers are being closely monitored throughout by BCR, and we are working closely with all the bodies involved to ensure switching is as effective as possible.” 

The unusual switching programme was designed after RBS failed to meet an earlier EU demand to sell or spin off a network of about 300 branches. BCR can extend the time limit if it fails to meet its 120,000 customer target by August, but some executives are also pushing it to widen the pool of customers who can take advantage of the offers. 

“If customers have had nine months of being invited to switch then more time isn’t going to make a difference,” one executive said.

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