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Connexus : Issue 38
unfriendly” regulation, potential risks highlighted include liquidity and margin pressures, and a two-speed economy that threatens to leave large regions of the nation in a spending decline. Some CEOs argue that tough new Basel III securitisation rules are hav ing an impact on the cost of funds and forcing the major banks into the retail market to challenge mutuals for both deposits and their higher-quality credit candidates. Others fear a flight to the big banks in uncertain markets, and potential fracturing of the mutual sector as some larger players push to become mutual banks. In response to a survey question about what pro-competition measures CEOs would like to see from government, there was an overwhelming call for a high deposit guarantee as part of promoting competition. Some CEOs suggested government should offer guarantees to mutuals only and not to banks. Easy-switch options for customers to leave banks are also in favour, and a number of CEOs implored government to allow more flexibility around the use of the term ‘bank’, asking for mutuals to be allowed to be called Australian Banking Institutions instead of authorised Deposit-taking Institutions, and greater use of the term “banking” to help promote their services. While credit unions, building societies and mutual banks are getting many things right, a theme running through the survey is that they must continue to explore new ways to revitalise an ageing membership and woo more members from generations X and y. The respondents endorsed a range of initiatives to aid this cause, including the rollout of innovative online products, stronger social media platforms and smartphone applications, and targeted marketing campaigns. as marketing channels change with online banking coming into its own, there is a view among CEOs that marketing and advertising campaigns haven’t been maintained or ramped up sufficiently to ensure mutuals build their brands and take advantage of market openings due to consumer dissatisfaction w ith the major banks. Many survey respondents anticipated that most spending in the near future would be directed at grow ing home loans and membership. Teachers Credit Union is committed to a prudent marketing campaign over 32 www.abacus.org.au FEATURE www.abacus.org.au 32 Connexus CEO SURVEY “Just over 32 per cent of respondents believe staff and customer service is their big strength, well ahead of products and rates at 7.5 per cent.” Reining in the big four Mutuals must hammer home what makes them great to stay relevant and competitive in the volatile economic climate. That message, from Frank Zumbo, an associate professor at the Australian School of Business at the University of NSW, comes with a compliment. “They do a fantastic job as it is,” he says. “They just need to continue that and be underpinned by the continuation of the government guarantee on deposits.” Zumbo’s endorsement of the bank guarantee will be welcomed in the mutual sector. The respected competition and consumer commentator says credit unions and building societies need to reaffirm their strengths around product pricing and member service. Consumers hold great respect for mutuals, he says, but challenges remain for the sector’s viability. “Obviously a real threat is the increased dominance of the four major banks and the continued failure of the federal government to take that dominance head on. It’s particularly tough for mutuals and anyone that’s not a major bank. “ The government has talked about reining in the market power of the big four, but hasn’t followed through yet on a number of recommendations, and more needs to be done to ensure we have a diverse banking sector.” Zumbo says the fact that consumers are more willing to save their money will have a flow-on effect for the mutual and banking sectors. He predicts official interest rates will fall in coming months as a means to underpin market confidence and resuscitate the non-mining parts of the economy. “I ’d like to see the four major banks do the right thing and give back to consumers some of those past interest rate hikes.”