(Australia) – Australia’s dominant Big Four banks are leading the charge for quality customers in Australia’s mid-corporate market, but the customers are becoming increasingly demanding and many are thinking about changing their banking provider.
These are
among the findings from the most recent round of research into Australia’s
commercial banking market conducted by leading market analysis house East
and Partners.
East –
which has ten years experience researching the Australian corporate
banking markets – has just completed its second six-monthly survey of the
mid-corporate sector, comprised of 6000-7000 enterprises turning over
between A$20-A$100 million a year.
The survey
is based on responses from chief financial officers or equivalent
executives at 654 enterprises – or around 10 percent of the target sector.
The survey
finds that technology changes at the major banks are driving a need for
scale which has brought the mid-corporate sector – once considered under
the umbrella of “commercial” banking – into the
“corporate” area.
Banks are
increasingly coming down the scale ladder to offer these customers
products previously only offered to larger corporates, and internet and
e-banking solutions are enabling them to do it.
But while
banks are increasingly courting commercial customers, their current
performance in customer satisfaction terms for most of them is at best
modest.
Mid-corporates
are engaging more bank product – particularly in the internet and
e-banking areas – but the sheer level of alternative options being
presented to them by the industry is leading many to question their
existing banking relationships as never before.
The survey
finds:
-
a rapid
escalation in forecast account churn, with 19.1 percent of all
mid-corporates actively considering a change in their principal
transaction banker in the next six months – or four out of ten
accounts annualised. Six months ago, in the last survey, only 14.5
percent of respondents were pondering a move – the change represents a
31.7 percent acceleration in six months. -
the NAB
is still the market leader, with 23.9 percent of principal banking
relationships, followed by CBA (22.3 percent), ANZ (19.6 percent), and
Westpac (17.6 percent). St. George is in fifth place with 4.9 percent,
up from 4.5 percent in the last survey. This survey round shows that
the NAB and Westpac are losing market share, while CBA and ANZ are
gaining. -
NAB and
Westpac are particularly vulnerable to customer churn intentions,
while levels of account churn at the CBA and ANZ are substantially
lower – a clear correlation with both players’ increasing market share
and share of wallet. 26.9 percent of NAB’s mid-corporate clients are
pondering a change, while at Westpac the figure is 25.2 percent. None
of the St. George customers surveyed were pondering a change of bank. -
of
international banks, the main players are – in order – Citibank, HSBC,
Deutsche, and JP Morgan. But while Citibank has the highest market
share among foreign banks (3.2 percent) it also has the highest
potential churn rate, with 19.0 percent of its customers actively
considering a change. -
Perth-based
BankWest’s drive into the mid-corporate market has had some success,
with the bank increasing its share of total principal transaction
banking relationships from 1.1 percent to 1.4 percent in six months.
In a sign that the bank is yet to win over the market, however, 11.1
percent of its customers are considering a change in the next six
months. -
customers
also want a clearer presentation of bank fees and charges, and they
also want those fees reduced. -
while
the internet is a popular channel, customers also want to see local
branch services and authorities returned or improved.
Commenting
on the survey, East and Partner’s principal analyst Paul Dowling said:
“The retention and deepening of an individual bank’s existing base is
critical, and the cross selling of product has become more important than
ever.
“And
while the survey highlights the importance of internet and e-banking, it
also shows that mid-corporate clients want their banks to understand them
better, and put more effort into the relationship.
“Expectations
are rising but satisfaction levels are only slightly better than average,
and that should be ringing some serious alarm bells.”