Bank satisfaction survey 2009

So which institutions came out on top for bank accounts, credit cards and homeloans in our survey?
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01 .Beyond the big four

The big four banks

In brief

  • 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.

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Building societies and credit unions top the charts for day-to-day personal banking, with both comparing very favourably against the banks. These mutual societies make up about 16% of our survey response for everyday banking (slightly more than that for each of ANZ, NAB and Westpac).

The country’s largest credit union, Credit Union Australia (CUA), and Teachers Credit Union (formerly NSW Teachers Credit Union) have the highest overall everyday banking satisfaction ratings. They’re followed closely by another credit union, MECU. The response for individual building societies was too small to report on, however, collectively they rate very highly.

Why are satisfaction levels higher with smaller institutions than their competitors? As the table below shows, excellent customer service really stands out. Mutual societies also achieved high satisfaction scores for fees, product range and internet banking. Perhaps another factor behind credit unions’ popularity is that they’re community-based and, unlike banks, don’t need to provide a return to shareholders.

A looser form of connection to the community may also help explain the high satisfaction with some of the second-tier banks. Bendigo Bank achieved the highest overall satisfaction score for a bank and, following its 2007 merger with Adelaide Bank, its products and services are available through 1300 outlets covering all states, including 236 community-owned franchises and 190 company-owned branches.

 ME Bank (previously known as Members Equity) also has very high satisfaction levels among respondents. ME Bank was originally set up by a trade union, industry superannuation funds and National Mutual (now AXA) and is now fully owned by not-for-profit super funds, with its earnings providing a return on investment for those funds and their members.


Big Four fall short

A number of other second-tier banks achieved good overall scores in the 70s, including HSBC, Bank of Queensland and Suncorp. But as the table indicates, bigger banks’ satisfaction levels fall well short, with ANZ, Westpac, Commonwealth Bank (CBA) and NAB rounding out the bottom. St George, at 69%, has a slightly higher overall satisfaction rating than its new owner, Westpac.

So what explains the Big Four banks’ poor performance? CHOICE members have three major gripes.

  • Fees: 36%-38% satisfaction rate.
  • Interest rates: 32%-36% satisfaction rate with the interest paid on everyday accounts.
  • Customer service: 59%-64%, compared with 85% and 86% for building societies and credit unions.

“The miserable level of interest (0.1%) represents an additional fee,” said one CHOICE member. “It takes hours to contact someone to talk to about your account”, said another. “I have timed CBA at one hour and seven minutes on hold.”

A more satisfied respondent commented that “ME Bank is really, really good. I hardly ever pay any bank fees at all. I just use EFTPOS for withdrawals, or withdraw from the ATMs of banks where they have negotiated fee-free withdrawals.”

Branch and ATM access

As you’d expect, the banks’ huge market presence means they performed better than credit unions for ATM and branch access. It seems consumers must weigh up poor service, fees and interest rates against convenience. “I hold two personal banking accounts, one with ANZ and another with CUA,” said one member. “I have banked with CUA for more than 20 years and have my personal loans with them. I conduct my everyday banking with ANZ because they’re close to my workplace and the convenience of being able to locate their branches when travelling (unlike CUA, whom I’d prefer)”.

New ATM network

A new initiative, released after our survey was conducted, gives the members of most credit unions access to the NAB ATM network without paying foreign ATM fees. NAB joined the rediATM network, enabling its customers and members of participating rediATM institutions to avoid “foreign” ATM fees at a wider range of machines.

Most credit unions and some banks, including AMP Banking, participate in the rediATM scheme, which combined with NAB customers, covers seven million cardholders. The combined ATM network is one of the largest in Australia, with 3100 machines spread across the country.


Credit cards

For overall credit card satisfaction, credit unions are the clear winners, followed by ME Bank, Bendigo Bank, Bankwest, American Express and St George (see table, below). There are five main areas of difference.

Interest rates The mean satisfaction score for banks (37%) is much lower than for credit unions. Part of the reason could be that banks hiked their credit card interest rates even when the Reserve Bank (RBA) cut the official cash rate.

Calculating interest We asked members to rate their satisfaction with their card provider’s application of interest when a bill is paid late or not in full. Again, the average satisfaction score for banks is well below those for credit unions.

Annual fees The average satisfaction score for banks is 44%, compared with the credit unions’ 71%.

Rewards programs Rewards satisfaction is not shown in the table, as for many respondents it wasn’t applicable. However, the average satisfaction scores for banks and credit unions are similar; both compare poorly with American Express. Separate CHOICE research found that American Express and certain cards from banks usually offer the best rewards programs.

Penalty fees Banks’ average satisfaction scores are dramatically lower than credit unions’. However, westpac and St George have reduced their late payment and over-limit fees to $9 and, from mid-December, ANZ will reduces those penalties from $35 to $20.


Home loans

Home lending is one area where big banks have really increased their market share over the past two years, at times seeming close to obliterating the competition. The Big Four have about 90% of the bank home loan market (and banks write about 90% of all home loans). Building societies, credit unions and non-bank lenders make up the remainder. According to Chris Dalton of the Australian Securitisation Forum, at one time non-bank lenders, a subset of the smaller institutions, wrote 20% of home loans, but now retain just 3%.

The sample size was too small to report on individual mutual societies (see the table, below), but we can say that as a group, credit unions have the highest overall satisfaction scores (81%, compared with the banks’ 63%). Of the institutions with an adequate sample size to report on individually, ME Bank has the most satisfied customers, followed by other second-tier banks ING Direct and Bankwest.

“ME Bank was the most upfront and transparent home loan lender, with clear information about its rates, which are the same as the ‘comparison rate’,” said one respondent. “All other Australian banks I researched use a very confusing and complex array of products and ‘arrangements’ and almost hide the comparison rate.”

Banks have dramatically lower scores than credit unions for interest rates, annual fees and tardiness in passing on the RBA’s interest rate cuts to borrowers. “Banks are quick to raise interest rates but slow in passing on any reductions, if at all,” said one survey respondent. Another was dissatisfied with “a sudden imposition three years ago of monthly account-keeping fees on the free savings account that came with my loan, with the bank insisting they reserved the right to charge fees – in the fine print”.

Nevertheless, banks retain the lion’s share – more than 80% – of the home loan market among survey respondents. Commonwealth Bank is the most widely used institution for home loans, with about one in five respondents borrowing from Australia’s biggest bank, and about the same number using it for everyday personal banking.


This survey shows that mutual society and second-tier bank customers are more satisfied than those of the big banks. The majority of respondents – 65% – are long-time customers who’ve been with their current institution (usually a big bank) for 11 years or longer.

So why don’t more people switch? Perhaps some Big Four customers just don’t realise what they’re missing. But there are other factors at play. Of the 76% of bank customers unlikely to switch for everyday banking in the next year, half stay because they’re satisfied with their bank, but of the rest, a third say it would be difficult to switch because they have several products with the same institution (see Why Bank Customers Don’t Switch, graph below).

We’ve been cleverly marketed to by banks who, like telcos, encourage us to bundle all our products with them, reducing the chances we’ll leave. There’s also the hassle of switching. “I need my bank, but I don’t like them,” said a member. “I like the idea of a community bank (such as Bendigo) but I just don’t have the time or effort to change.” Other customers believe there’s not much difference between banking institutions, making switching not worthwhile.

We also wondered if people consider their money to be safer with the Big Four, despite a government guarantee applying to customer deposits with all authorised banks, building societies and credit unions until October 2011.

In a recent Senate inquiry, Rod Masson of the Finance Sector Union spoke about the so-called flight to quality. “In home loans and in deposits, it has been particularly evident that consumers are feeling the need for security and are moving back to [the big banks]. So they completely dominate the market when you start to break down the number of accounts they hold.”

The fact is, the perception of security among CHOICE credit union and building society customers surveyed is just as high as that of bank customers.


How we survey

Our Community Insights team asked respondents to rate their overall satisfaction with financial institutions used for personal everyday banking, credit cards and property loans, as well as more targeted satisfaction levels in individual categories such as fees, interest rates and customer service.

The number of responses is shown in brackets in the tables. We report on individual institutions where at least 30 responses were received. We recommend greater caution in interpreting findings derived from smaller samples. Responses for individual institutions are included in aggregated group figures, such as “all building societies”.

Thanks to the 3003 CHOICE members who completed our survey in August 2009. The response was evenly split between magazine and online members.

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