Santander has been the main winner in attracting account switchers over the past 12 months with 95% of its UK customers reportedly satisfied with the 123 current account. Valentina Romeo looks at Santander’s latest financial results and its 123 credit card programme
The Santander 123 credit card has claimed to be the UK’s best value cash-back deal for everyday spending, challenging closest rival American Express (AmEx).
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When the AmEx card was launched in September 2011, American Express claimed it could offer the UK’s highest cash-back returns over the first two years of use, with one of the highest unlimited rates too.
However, Santander seems to have one upped the American company with a formula to lead the market when it comes to cash-back credit cards.
Since Santander discontinued the Zero card there has been a shift in market demand for zero fee cards.
While it isn’t the first time a credit card offers supermarket, department store, and petrol rewards, Santander’s proposition looks to be one of customers’ favourites.
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By GlobalDataThe Santander 123 credit card adds to the 123 Current Account by giving 1% cash back on all supermarket spending, 2% at department stores, and 3% at petrol stations.
The 3% tier has been extended to include spending on National Rail travel and the Transport for London Tube network.
Although the 3% cash-back is capped at £300 per month, deals of this kind highly sort after by customers as petrol prices and above-inflation train fare rises continue to be a common customer bugbear.
"The 123 Credit Card is designed to ensure that customers do not need to change the way they shop in order to earn cash-back. No other providers reward customers for everyday spending like this with tiered cash-back of 1%, 2% and 3%," a Santander spokesperson tells CI.
"The cash-back is rewarded automatically – there is no requirement for the customer to ‘opt in’, unlike other rewards-based propositions in the market and is paid monthly," he adds.
The Santander 123 cash-back credit card has a £24 annual fee that many could see as off-putting. However, if customers already have or open a Santander 123 current account within the end of 2014, the card fee will be waived.
As for its competitors, with American Express Platinum Cash-back Everyday Credit Card customers must spend at least $5,000 (£3,000) a year to qualify for cash-back. Similarly, with NatWest cash-back card, the reward will come only if a client earns more than £10,000 per annum.
Santander says: "We are the only credit card to give cash-back in all of these ‘everyday’ categories (both the current account and the credit card). The market norm is to apply cash-back annually. Ours being monthly is more timely for customers to see the real value.
"Most cash-back propositions have ‘intro’ offers/periods, whereas the 123 Credit Card provides a consistent reward in core categories with seasonal, bonus cash-back promotions on top."
According to Santander, the 123 proposition is transforming the customer profile, whilst attracting new customers and improving clients’ satisfaction.
The Financial Research Survey reports that the gap between the satisfaction score for Santander UK and the average score for the top 3 performing UK peers has narrowed by 7 percentage points since December 2011. Moreover, research by MoneySavingExpert.com shows particularly high satisfaction amongst 123 World customers.
In the UK, there are now more than 2.4m Santander 123 current account holders as of 30 January, with 860,000 also holding a 123 credit card. Santander reports that there are over 1.1m new customers since the beginning of 2013 holding a 123 Current Account.
With the impact of the Current Account Switcher Service introduced in September 2013, Santander UK also experienced a net gain of 11% of accounts transferred in the year. In 2013, over 232,000 customers moved their current account to Santander UK from other providers, the bank reports. Furthermore, the bank says total deposits held by primary banking customers increased by 43% in the same review period.
Since launch of 123 Current Account in March 2012, there has been a 121% growth in the account balances. Current account volumes skyrocketed by 75%, to reach £27.9bn in December 2013 from £15.9bn year-on-year, the bank says.
"123 customers tend to have higher balances, more products with us, transact more frequently and with a higher average credit card spend than other customers," Santander concludes.
Banco Santander has a market capitalisation of around €74bn ($102bn), which makes it the leading bank in the euro zone and eleventh in the world. At the end of 2013, Santander had 3,299,026 shareholders, 182,958 employees serving 103m customers in 13,927 branches.
According to the Bank of England, UK lenders reported that demand for credit card lending fell in the fourth quarter of 2013, but expected demand to increase slightly over the next three months.
In addition, a recent FICO review of over 38m UK credit cards shows that the number of active credit cards has dropped in the year to November 2013.
Meanwhile, new accounts have experienced an increase in activity rate, rising 8% to 72%. This could be due to the increase in 0% or low-rate balance transfer offers, the report says.
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