RFi Group Opinion - Australia: Switching Main Bank and Keeping it real - Retention, Acquisition, Experience and Leading Indicators

Over the last 12 years, RFi Group has been tracking trends and metrics in the Australian banking market with close interest. There isn’t a day of the week that we aren’t in the field interviewing consumers about their financial services needs, behaviours and expectations and in fact, on an annual basis in Australia alone we conduct in the region of 200,000 survey interviews.

This means that we can track hundreds of metrics across the Australian market from experience measures like NPS and Satisfaction to ‘action’ metrics like spending, applying and researching. However, across all these metrics, perhaps the ones that I like the most are the ones that track switching of products; switching in the past and intent to switch.

Half a million main bank switchers every year?

Retention and acquisition of customers are critical factors for any business and this is no different in the banking world, in particular when it comes to the main bank relationship. As I’ve discussed in the past, the main bank status is inextricably linked to the primary transaction account that a consumer holds (the overlap is greater than 90%).

Jumping into the switching stats that we have been gathering since 2008, the long-term average regarding an intention to switch stands at 7% - that is, 7% of Australian consumers are highly likely to switch their primary account in a 12-month period.

In reality, when we track actual switching, the figure is closer to 3% - which equates to 500,000 consumers jumping from one bank to another every year.

Effectively, the switching intention acts as a leading indicator of the actual switching and this is why it’s so interesting. In fact, this can be replicated at a brand level, with an intention to switch to a specific bank flowing through to actual switching movement (albeit at a lower level as per the overall statistics).

Who is winning?

So where do switchers end up going? This is something else that we have been tracking for the past decade and it makes for interesting reading. The stats paint a picture of competitive offers in the market and their relative successes.

For example, recent data shows a tailing off from the impact of the Apple Pay launch in H1 2016 on the acquisition for ANZ. In July 2017 ANZ was the number one destination for switchers in the transaction account market. However, in November 2017 order had been restored and CBA returned to the top.

Equally, up until the end of 2017, ING was attracting approximately one in ten switchers, only to fall to 5% by March 2018 as the bank’s acquisition offers changed from cashback to other incentives.

Watch out for Westpac?

So, what’s next? The data would suggest that it is the Westpac Group – in particular Westpac and St. George – that are seeing their share of switchers grow in recent times. In fact, in March 2016 the two brands were attracting a combined 6% of switchers in the market, a proportion which has more than doubled to 13% in March 2018.

And these stats are backed up by the APRA data on growth in household deposits. Over the period March 2017 to March 2018, Westpac’s book grew by 5.9% or $11.5bn. To put that into context, CBA grew by 3.9% ($9.5bn), NAB by 5.3% ($6.4bn) and ANZ by 4.1% ($4.7bn).

So, should you be on the lookout for Westpac?

Yes, but arguably its too late. The key would be to be monitoring the leading indicators in the survey to watch for intended movement.

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