The CHOICE campaign for Better Banking
CHOICE believes that consumers in Australia are getting a raw deal from the banks – and we think that is often because of a lack of competition and customer focus. The future health of the banking industry in Australia depends on a renewed focus on its customers, with better services, fair products and decent practices.
- That’s why we are demanding action by government, banks and consumers to reinvent banking so that it is more competitive and works for consumers. We believe we should start reforms today – our members know what’s broken in banking. There are solutions that decent banks are already putting in place. CHOICE will work with the Senate Inquiry and any government review to ensure the consumer voice is heard and the excuses end.
- The CHOICE campaign for a better, more competitive banking sector will focus on three areas: better, more competitive products; better service better practices; and renewed consumer confidence in a stable, well-governed banking system. The campaign includes a series of Better Banking ‘Your Say’ public events, so that CHOICE can ensure the voice of consumers is centre stage in the present public debate about banking, including the ongoing Senate Inquiry.
- We are starting with a call for three key actions – for government, banks and consumers – that would make a real difference. But we will bring forward further proposals based on what our members, consumers and experts tell us.
The CHOICE reform agenda
While the economic importance of a strong banking system is clear, customers on the ground are not happy. CHOICE consumer surveys show high levels of dissatisfaction as they struggle with the symptoms of a lack of effective competition and information asymmetry. Poor customer service, high fees and charges, negligible returns from savings, and barriers to switching leave most customers feeling locked into a bad deal.
In our recent survey, the Big Four banks ranked bottom for customer satisfaction; mutual society and second-tier bank customers are more satisfied. There is an urgent need for banks to renew trust and confidence with consumers.
The Government has put in place welcome reforms, for example the National Consumer Credit Protection Code, and we warmly welcome the proposed new rules for credit cards and financial advice providers. But there is a long way to go before consumers will believe they get a fair deal that supports a renewal of trust and confidence in the banks, which is why we support further reform, based on well-targeted regulation and the proactive pursuit of more effective competition.
Our policy agenda for banking reform starts with what really matters to Australia’s consumers. We want change to deliver a more competitive banking sector that works in the interests of consumers.
Three actions that would be a start in shifting banking back to putting consumers first are:
To the government: increase consumer switching and competition in the banking market, and make a start by stamping out unfair fees.
Unfair fees and charges are symptoms of the uncompetitive and concentrated market in Australia. CHOICE has welcomed the government’s planned moves against excessive mortgage exit fees and unfair credit card terms. But consumers have been driven to taking collective legal action – such as this week’s against ANZ – to recover unfair fees.
The Government should show it’s on the side of consumers by stamping out disproportionate banking charges across the board – as the UK government is doing right now – through a voluntary agreement with the banks if possible or if necessary by bringing in regulation so that fees are based on reasonable costs incurred by the provider.
But this is not enough. The Government should also act to ensure there are better deals around, offered by a wider variety of providers – by promoting greater choice and competition.
It’s clear from our research that the Government’s switching package has not made enough of a difference. We want the Government to move quickly and put in place a mandatory new switching scheme that takes out the hassle for consumers.
First off, anyone wanting to move to a new bank should only have to sign a single form at the new bank that then guarantees the transfer of all direct debits and credits from the old bank to the new. That would mean all banks agreeing to transfer the data upon request within a reasonable time limit.
In the longer term, we want to see the introduction of portable account numbers, similar to the situation that now exists for mobile phone numbers.
Further, we want the Government and the ACCC to carry out an immediate review of barriers to new providers entering the banking market, and to find practical ways to promote the role of mutuals, for example by better marketing and enabling access to more building society and credit union products through Australia Post. We also want to see an urgent review of where the Global Financial Crisis has left the competition landscape, in particular the competitive advantage provided by the taxpayer to the Big Four banks through the implicit government guarantee they enjoy.
To consumers: call your bank today and ask for a better deal.
Many consumers lose money by sticking with an uncompetitive product – together this amounts to billions of dollars paid or lost by consumers every year.
Consumers should first call a customer services adviser at their bank and ask for a better deal. If they are still not satisfied, they should consider switching. Go to Compare, Ditch and Switch at the CHOICE website, find the best-rated providers and follow the guide to switching.
This can make a real difference. A CHOICE survey found that roughly a third of transaction account and home loan customers who were proactive in asking their financial institution for a better rate, got it. One in 10 of those who convinced their bank to give them an interest rate reduction, scored between a one-two per cent discount.
CHOICE also found that simply calling your bank can mean you get fees refunded, while switching to a different transactions account can mean big savings on fees in the future. And no one should miss out on interest by keeping savings in low rate accounts – ask your bank if there’s a more competitive offer. Nearly a third of consumers surveyed by CHOICE got an improved rate of interest on their savings account simply by asking.
To the banks: get on board.
The message from CHOICE to the banks is simple: get on board now with Better Banking before the Government is forced by overwhelming public opinion to force change.
Some banks are already cutting fees, focusing on better customer service and offering more competitive and consumer-friendly products. There is no reason for the industry as a whole not to change itself – and to make a start by eliminating unfair charges and enabling switching.
Next steps for the people’s watchdog
CHOICE has launched a series of Better Banking ‘Your Say’ events around the country, to gather evidence from consumers about their views on banking and the need for reform. We will make sure the voice of the consumer is heard loud and clear by the Senate Inquiry into banking, the government and regulators, and the banks themselves.