Big four go after mid-corporate market
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."