CHOICE has provided a submission to the federal government’s Financial System Inquiry, calling for several key reforms to put power back in the hands of customers.
The inquiry, headed by former Commonwealth Bank CEO David Murray, is the first major review of Australia’s financial sector since the Wallis Inquiry 17 years ago, and will consider issues including competition and how the financial services sector has fared since the global financial crises.
As part of the submission, CHOICE has provided new research focusing on the experiences of consumers in Australia’s banking and financial services sector. One result was consistently higher levels of satisfaction among customers of smaller institutions compared to the Big Four banks.
CHOICE CEO Alan Kirkland noted the results were similar to the outcomes of past member satisfaction surveys, and indicated a lack of competition in the sector.
"Across every product category we looked at – transaction and savings accounts, home loans and credit cards – the Big Four banks rank lower than their smaller competitors for customer satisfaction. This is obviously at odds with their overwhelming market share, and points to a lack of competitive pressure, where those businesses that perform best are not being rewarded,” Mr Kirkland said.
What CHOICE's research found
Other key results of CHOICE’s research include:
- 58% of respondents agreed with the view there was a lack of competition in the services and offerings provided to them by the banking sector.
- An overwhelming majority of 89% thought it was important for the inquiry to focus on increasing consumer protection, closely followed by reducing credit card surcharges (86%), providing better information for bank customers (84%) and increasing competition (83%) and stability (83%) in the banking sector.
- CHOICE investigated barriers to switching, and found one of the most significant was the perceived "hassle factor", identified by 36% of respondents overall.
- The "hassle factor" was highest at 44% for those who considered switching transaction accounts in the past two years but stopped short, suggesting moves to streamline this process have not worked.
What CHOICE wants
CHOICE’s submission has made a total of 14 recommendations for the inquiry to consider, ranging from competition, better information and consumer protection through to new technologies, superannuation and credit card surcharges.
A key focus of the submission is to drive consumer-led competition, while building on some of the important protections that have safeguarded consumers over recent years, including external dispute resolution schemes, licensing requirements and industry-specific regulation.
“CHOICE believes that Australia’s financial sector has a strong foundation, but without increased competition, driven by consumers, we will continue to see the major banks put their customers second when it comes to big decisions on interest rates,” Mr Kirkland said.