CHOICE’s ongoing campaign to make the Australian banking sector more responsive to consumer needs reached a milestone today with the release of our Better Banking report, which will go to the Senate Committee on banking competition. Read the key recommendations of our report.
The 40-page report draws heavily on CHOICE member feedback as well as extensive industry research. It lays out a detailed plan to unlock consumer power, introduce a new focus on customer service, and secure an obligation for banks to support the community. Starting today, the CHOICE Better Banking team will make the report available to consumers and bank CEOs before personally delivering it to Treasurer Wayne Swan and the Senate Committee on banking competition.
As outlined in the report, a key driver of our Better Banking initiative is the negligible degree of real competition between major players in the banking industry. Our polling and research shows that banks behave with disregard for customers needs and offer low levels of customer service – a shortcoming that extends to giving inappropriate or erroneous financial advice, engaging in deceptive marketing ploys, and focusing on gaining new customers to the exclusion of existing ones.
As it stands, the big four banks hold 81% of household loans out of the 54 banks in Australia and 78 per cent of all bank deposits – yet these same banks rank at the bottom of customer satisfaction polls. Why don’t customers switch? Because the banks make it too hard.
Our polling and customer surveys indicate administrative hassles remain a major impediment to finding a better banking deal. In December last year we launched our “Compare Ditch and Switch” website, a quick reference tool that allows consumers to compare accounts. The site saw over 50,000 visits in its first month of operation.
The government has also taken notice with its banking reform package, and a Senate Inquiry report on competition is due at the end of this month. The CHOICE Better Banking report calls for a practical solution to the difficulty of moving your money to another bank – portable account numbers. We think banks have a duty to allow easy switching and to quickly deal with the administrative details of things like changing direct debit or credit arrangements. They’ve got the information at their fingertips.
An important philosophical underpinning of the report is the longstanding state of “information asymmetry” between banks and their customers. Banks make little effort to communicate with customers on their own terms. Hard-to-decipher terms, for instance, are a common complaint among CHOICE members.
Instead, banks use their inside knowledge of industry jargon and complex financial concepts to the detriment of customers. In effect, we are given little choice but to trust the banks, even though banks have done little to earn that trust. The CHOICE Better Banking report lays out a number of initiatives aimed at undoing this power imbalance, including clearer, simpler documents and full disclosure on all fronts.
We think banking services should be efficient, responsive and flexible when dealing with the account and loan holders that make banking possible – and that drive huge profits for the industry and massive pay packages for banking executives.
Pushing for action
Our message for consumers is simple – take action. Demand a better deal from your bank, or find a new one. Over the past year there have been promising signs that banks are waking up to customer outrage. We like to think our focus on this issue has had something to do with this.
But consumer inertia continues to play into the hands of the bankers. The industry has not given rise to a culture of ethically driven ideals. As our report makes clear, banks will do whatever they can get away with. But they will also respond to a united demand for better service and fairer dealings from the customers who make the industry possible.
CHOICE CEO Nick Stace believes we have arrived at a once-in-a-generation chance to win lasting reform. “Consumers have shown they are up for change, the government is playing its part, and some banks now seem ready to change too.
“There is growing recognition that what’s good for consumers is good for the better banks. Our action plan will put consumers in the driving seat, so they can easily compare the market and switch to the best value providers. That will heap pressure on the worst banks to raise their game.”
Richard Lloyd, director of the Better Banking Campaign at CHOICE, also urges the industry and government to seize the moment.
“Better banking isn’t an impossible dream. We’ve pointed to many examples of reform in other countries that should happen here. If the banks respond positively, this will transform the one-sided, anti-consumer culture of banking that angers so many Australians. We want every decent bank to commit to taking their service to new levels within the next year, ending unfair fees and uncompetitive practices.”