Half of Australians to Switch Banks for Competitive Interest Rates, Backbase Research Claims

Backbase, which claims to be the global leader in Engagement Banking, has released a new report titled, “Banking Disruption: Australians’ Shift in Focus towards Credit Unions, Mutuals and Second Tier Banks”, which highlights the ways Australians are engaging with the top 10 banks online and via mobile apps, and their expectations of banks and digital banking amid the rising cost of living.

The report analyzes findings of a survey, “conducted by PureProfile and commissioned by Backbase, of 1,003 customers of the top 10 banks in Australia.”

Banks are competing on interest rates and customer experience

Despite more than half (54%) of consumers being confident their primary bank of choice is pricing its products and services, “including interest rates, fairly, half (50%) claimed they would switch their primary bank for better interest rates.”

Other highly rated reasons for switching banks “related to the overall customer experience, including the number of branches and ATMs available (18%), limited features in internet banking and/or the mobile banking app (14%), slow internet banking and/or mobile banking app (13%), needing to log into multiple sites to access different products within the bank (12%), unappealing user interface and navigation (11%), and outdated banking products that no longer suit their lifestyle (13%).”

Currently, one in five (19%) consumers “claimed to be considering switching out from their primary bank, with 3% moving to a second tier bank, 3% moving to a digital bank, 2% moving to a big four bank, and 10% planning to switch but not having chosen a bank yet.”

Furthermore, almost three-quarters (72%) of customers “believe banks should consider changing their products, services, and the customer experience they deliver due to the rising cost of living.”

Iman Ghodosi, Managing Director of Backbase Australia, commented:

“The banking sector has an opportunity to engage with customers as they are weighing up their financial service provider options amid various economic shifts and financial pressures. Beyond interest rates, Australians are also looking for a helpful and smooth digital experience when managing their finances. Of those looking to change banks, almost half would switch based on factors related to the customer experience, and this is where effective investment by banks could pay significant dividends.”

Expectations of banks and digital banking experiences are evolving

Over a third of respondents (35%) “believe their bank or the whole banking industry has the most responsibility to alleviate consumers’ financial pressures among rising interest rates.”

Over a quarter (26%) “placed responsibility with the Federal Government, and a quarter pointed to the Reserve Bank of Australia (RBA).”

This mindset is “taking place alongside an ongoing shift to digital banking.”

Over one third (35%) of consumers “have not visited their bank’s physical branch in the last six months, and more than half (59%) have not called their bank’s call center in the last six months.”

More than half “log into their mobile banking app or internet banking account at least once a day, with a quarter (24%) citing financial insights in their banking app being their favourite feature.”

The products that respondents were most comfortable purchasing or subscribing to using a digital banking product without having human interaction are a savings account (74%), credit card (48%), and term deposit (27%).”

The most common reason “for visiting a bank’s branch was to deposit or withdraw cash (54%), followed by being asked to submit physical documents (29%), and to open a new account (17%).”

Ghodosi continued:

“Over 60% of the respondents have been with their primary bank for over a decade, and while many intend to stay with their bank, their expectations of the services they receive are changing and there is a significant portion of the market willing to change for the right digital and financial experiences. Helping customers easily manage their finances online, see everything in one place in their mobile app, and quickly get the answers they need when things go wrong are important to customers in this digital banking age.”

As noted in the update:

“Providing individualized experiences will help banks succeed in today’s competitive market. This could include personalised campaigns, unique savings plans and options, and tailored re-financing options for those needing to make significant changes. Around the world, and particularly in the APAC region, there are banks offering high-interest rate savings plans to generate and sustain customer loyalty, and there are learnings from some of these success stories that local banks could be adopting. There is also a clear opportunity here for second tier banks to meet these new customer expectations while one in ten customers are still determining where to move their finances.”

As covered, Backbase is “a private fintech company, founded in 2003 in Amsterdam (global HQ), with regional offices in Atlanta (Americas HQ), New York, Boise, Mexico City, Toronto, London, Cardiff, Dubai, Kraków, Singapore (Asia HQ), Hyderabad, and Sydney.”

Research methodology:

PureProfile, “on behalf of GBG, surveyed 1,003 Australian consumers in February, 2023, to understand how customers of the top 10 banks in Australia engage with their bank in-person, online and via their mobile application.”

The top 10 banks “were Commonwealth Bank of Australia (CBA), Westpac, NAB, ANZ, Macquarie Bank Limited, Bendigo and Adelaide Bank, ING Bank (Australia), Bank of Queensland, Great Southern Bank, and AMP Bank.”

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