Refinancing business tipped to surge

According to RFi’s Australian Retail Banking 2012-2013: Key Trends in a Brave New World report, released today, Australian banks are on the cusp of unprecedented change driven, in part, by the rise of the ‘disloyal bank switcher’, who will have no issue voting with the click of a button and signing up with a different financial institution that can better meet his or her needs.

RFi’s director of consulting Alan Shields said there have never been so many major influences at play that cause significant market disruption and impact Australians’ behaviour towards their banks.  

They are global uncertainty, the unparalleled take-up of technology with smartphones and tablets, and three population humps – all of whom are entering new points in their life cycles.

These influences will dictate the way banks interact and engage with their customers and only those that respond promptly to the emerging challenges and opportunities will be well positioned to serve growing numbers of hyper-connected, well-informed and empowered customers, Mr Shields said.

“Australians are as worried about the future as they were in 2009 when we saw ‘shock cocooning’ of savings,” he said.

“Consumers are also price sensitive and want to find the best deals from their banks.  For example, 67 per cent of consumers now say a decision to refinance their mortgage is based purely on rates and many consumers have become aggressive with their demands, with 29 per cent of interviewees saying they would only consider refinancing for a rate discount of at least 100 basis points.

“Consequently, customers are scrutinising every penny charged by their banks and are looking for the best deals and the most conveniently delivered offerings.  They want better access to their accounts – potentially via their mobile phones - and they want fair value.”

Mr Shields said government and media campaigns that encourage Australians to “shop around” for the best deal are starting to have an impact on borrowers.

“Switching has become a growing trend among bank customers with 26 per cent of Australians switching their term deposits, 24 per cent switching their personal loans, 23 per cent their mortgages and 20 per cent their credit cards to other providers in the past three years,” he said.

“Banks can no longer rely on customer apathy as a defence mechanism.  They need to engage directly with customers and build loyalty.”