Big Four Banks Abuse Customers At Their Peril

Sun Herald

Sunday July 16, 2006

Kerrie O'Brien

IT won't come as a surprise to most people that customer satisfaction with the major banks in Australia is not high. But we are creatures of habit, the majority of us. We tend not to vote with our feet, even when dissatisfied.

That said, the past decade shows a slight trend towards alternative banks and lending institutions, such as community banks, credit unions, building societies and mutuals.

There are newer, more savvy lending institutions, Kerrie O'Brien writes.

Figures provided by banking researcher Cannex clearly show that there are tangible benefits available to consumers who shop around, whether in terms of low or no account keeping fees, or lower interest rates charged for credit cards and personal loans.

Competitive prices

Alternative financial institutions have increased in popularity largely due to their offering very competitive products. These include the likes of Bendigo Bank, Newcastle Permanent Building Society, Heritage in Toowoomba, Banana Coast Community Credit Union and Greater Building Society on the Gold Coast and the Maitland Mutual Building Society.

Structures vary according to the type of institution, but the main four are credit unions, community banks, building societies and mutuals.

Australian credit unions and mutual building societies this month united to form a new industry association called Abacus. Collectively, they are the biggest player in Australian banking after the big five banks. Credit unions and mutual building societies have 4.5 million members and total assets of more than $50 billion.

Cannex financial adviser Garfield Wright says one of the key advantages of non-banks is competitive pricing. Credit unions, for example, use cheaper deals on personal loans as a gateway to clients.

"People finish university and want to get a car. Later, they want to buy a house, and because they have developed a relationship with that institution that will often lead to their staying with that company," Mr Wright says.

He says it's the same thing with deposit accounts, which are typically fee-free. "They get you in the door," he says. "It's a relationship that can blossom with time."

Home loans and credit cards

Credit card offerings are more of a mixed bag.

A lot of credit unions have the same card as other financial institutions, where rates are set by a company such as Citibank. It's cheaper for them to rebadge an existing card than set up their own.

The four major banks still have the lion's share of the home loan market, but competition and shopping around is increasing with relation to home loans.

"The perception is that it is difficult to change over your mortgage, but that's not necessarily the case," Mr Wright says.

In fact, some alternative banking organisations provide a service whereby you don't even need to go into your current bank to change over.

The Greater Building Society on the Gold Coast is one such company. It will do all the administration for you once you have filled in the appropriate paperwork.

More pressure on banks

Extensive branch closures in the 1980s and '90s, which in large part led to the emergence of community banks such as Bendigo Bank, left many Australians with a negative attitude towards the majors.

In the past few years, several have reinvested in their branch networks to address the continuing perception that they don't care about their customers. Other changes they have introduced include flat fees charged for accounts, lower rate credit cards and a more concerted focus on customer service.

In more recent times, competition for the banks is hotting up from other quarters, with the entry of several foreign banks to the Australian market. Organisations such as Hong Kong Bank, HBSC, the Arab Bank and GE Capital are all pursuing the domestic market. And that can only be a good thing, hopefully leading to better service and lower fees for all consumers.

LOW FEES THE LURE

BRAD Spolding is acting general manager of the Snuff Puppets, a Melbourne-based arts organisation. He recently joined Nurses First, a credit union set up primarily for nurses and police, on the recommendation of a friend who is a member.

Previously a customer of Westpac and the National Australia Bank, Spolding was impressed by what he heard.

"The biggest thing for me was being able to use any ATM free," he says. "To be able to access all the services a bank provides - for example a Visa debit card - and being able to deposit money at any post office, and internet banking, without incurring significant fees, was attractive."

Because he travels domestically and internationally for work, Spolding wanted to avoid being penalised for using other than specified ATMs. "My last bank statement had $50 in fees for using so-called foreign ATMs," he says.

Although Nurses First's only branch is in Melbourne, Spolding primarily uses internet banking, credit cards and ATMs. "Nurses First charge something like $1.50 for Visa debit card and $1.50 for internet banking, so it's only $3 a month," he says.

© 2006 Sun Herald

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