CHOICE believes the Senate Economics Committee’s recommendations into competition in the Australian banking sector should lead to several immediate steps being taken to ensure a more competitive and consumer-friendly banking sector.
The Committee’s detailed report builds on the recent wave of bank scrutiny prompted by concerns about the significant market power and lack of genuine competition between the ‘big four’ banks.
“CHOICE welcomes the Committee’s call to prise open the ‘big black box’ of the banks’ decision-making on interest rates,” said CHOICE Director of Campaigns and Communications, Christopher Zinn.
“The ‘big four’ regularly protest that they are only passing on the higher costs of borrowing from overseas. But as we’ve seen just this week, their profits are heading through the stratosphere, so let’s apply some scrutiny and see if their arguments really hold water.”
CHOICE also applauds the Committee’s push to reduce the massive complexity around many financial products, and to increase requirements for clear, no-nonsense disclosure documents, allowing consumers to better compare products.
“The Committee’s report reinforces some of the key reforms CHOICE has been calling for through our Better Banking Campaign. These include making switching banks easier by using the same model that operates in some European countries and making lenders mortgage insurance far more flexible,” said Zinn.
“But there are also areas in the report that don’t go far enough. We continue to campaign for the abolition of fees for on-screen ATM balance checks, the introduction of portable account numbers and improved customer service. Additionally, there must be no retreat from the abolition of mortgage exit fees.”
CHOICE believes this is a once-in-a-generation chance to secure real banking reform, and this process should proceed without delay.
"Customer mobility and reducing the hassles of switching are at the heart of getting competition back into backing. Lowering unnecessary barriers such as paperwork will help but consumers have to believe they are moving to better offerings and better institutions," said Zinn.
“When it comes to ATM fees, it is not enough to politely ask banks to warn customers their withdrawals will result in fees - they should do it as an absolute visible requirement.”
In March, CHOICE released its Better Banking report detailing 14 practical reforms for a more competitive and consumer-friendly banking sector, including:
- Reducing barriers to competition through the introduction of bank account portability.
- Removing barriers to switching home loan products, including mortgage exit fees, and tackling the inflexibility of lenders mortgage insurance.
- Linking Banking Executives’ remuneration to good customer service, not sales targets.
- Removal of ATM fees for on-screen balance inquiries and improved disclosure on ATMs
CHOICE’s report describes an uncompetitive Australian banking industry in which the banks that have the biggest market share also consistently rate bottom in customer satisfaction surveys and are often the most expensive.
Read the CHOICE submission to the Senate Economics Committee Inquiry into Banking Competition at www.choice.com.au/bankingreport.
NB: CHOICE has been meeting this week with consumer groups from around the world at the Consumers International Congress in Hong Kong. One of the key themes from nations large and small has been problems with financial institutions and services, particularly too little competition and too much complexity.
- Ingrid Just, CHOICE: 0430 172 669