01.Beyond the big four
- CHOICE surveyed more than 3000 members to find out how satisfied they are with their financial institution.
- Mutual society and second-tier bank customers are more satisfied than those of the Big Four.
The global economy may be in the doldrums, but Australia’s big banks are not. Over the past year, the Big Four banks – ANZ, Commonwealth, NAB and Westpac – have increased market share, grown through mergers and acquisitions, and continued to make big profits. And while the economic importance of a strong banking system is clear, customers on the ground are not happy.
In CHOICE’s personal banking survey, the Big Four ranked close to bottom for overall satisfaction — with damning comments about everything from high fees to second-rate service. Their reluctance to pass on full interest rate cuts to home loan borrowers, and high credit card penalties, also drew ire.
The good news is that even in the era of a highly concentrated banking market consumers do have a choice. Smaller banks, building societies and credit unions generally ranked far better in just about every category we assessed. More than 3000 members participated in our detailed survey, an indication of just how much interest and concern there is around the banking industry.
Please note: this information was current as of September 2009 but is still a useful guide to today's market. For more recent information, see our Bank satisfaction survey 2011.
Big Four but Giant Two
Australia’s big banks have exploited the economic downturn to increase their market share. The Big Four banks have got bigger; despite CHOICE’s opposition, the mergers and acquisitions of major financial entities have proceeded. And when you include recent acqusitions, within the Big Four there’s an increasing dominance of what we call the “Giant Two” – Commonwealth (including Bankwest) and Westpac (including St George).
They now command more than 55% of both the bank deposit and home loan markets, however Bankwest and St George continue to operate separately from their owners.
Serious questions are being raised about the level of competition in Australian banking, an issue acknowledged by the Australian Competition & Consumer Commission (ACCC). Graeme Samuel, ACCC Chair, has called Australian banking a “comfortable oligopoly”. The increasing dominance of the Big Four has led to calls for the federal government to set up a new bank to provide more competition and choice, a position supported by 44% of our survey respondents.
Even without a government-owned bank, consumers have plenty of choice outside of the Big Four and the Giant Two. CHOICE members have overwhelmingly stated their higher satisfaction levels with mutual societies, followed by second-tier banks, in most of the product categories assessed.
Lifting their game
Even though many banks fared poorly in CHOICE’s satisfaction survey, there are signs some are lifting their game.
Fees Thanks to a CHOICE campaign, a reduction in bank penalty fees, such as for overdrawing your account, has been announced by all Big Four banks. For the first time, competition is a force in penalty fees. While some credit unions have also reduced penalties, we suspect that others and second-tier banks will need to reduce or eliminate their penalties if they’re to remain highly ranked in customer satisfaction surveys.
Everyday account ING Direct has launched a new transaction account we believe raises the bar for the industry, putting pressure on larger banks and smaller mutuals to improve their offers. We expect ING Direct’s entry to make a big impact on everyday banking popularity rankings over the next year.