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Connexus : Issue 38
34 www.abacus.org.au FEATURE www.abacus.org.au 34 Connexus CEO SURVEY the next 12 months and beyond. “We’re seeing aggressive marketing from the major banks, especially of late on fixed-rate home loans,” says James. To counter this threat, mutuals will have to carefully manage general expenditure levels “because we’ll have to increase our sales and marketing costs to be able to compete”. and he says mutuals must take advantage of government endorsements of mutual banking and its potential to act as a fifth pillar of banking. Cautious consumers reserve Bank of australia (rBa) governor Glenn Stephens has turned the spotlight on flat retail markets with his discussion of the “cautious consumer” phenomenon that has turned debt-lov ing australians into savers, at least for the time being. Only a few years ago, households were on average spending about 2 per cent more than they were earning. In February this year, the rBa reported that they were saving 10-11 per cent of their disposable income. The trend helps financial institutions consolidate and draw deposits, but it’s having a marked impact on retail lending. James observes that people are holding off purchasing big-ticket items such as homes and cars. “and certainly with clothing and such, they’re not shopping.” Despite such an environment, he believes strong marketing from mutuals can help win back some market share from the banks. “Don’t forget that the banks got close to 90 per cent market share during the global financial crisis and there’s still a lot of room for credit unions, mutual banks and building societies to take some of that back.” The survey underlines that lending is taking a hit, but a flight to savings is helping deposits. Doughty says consumer sentiment has eased back to very cautious on the back of recent sharemarket jitters. “But we’re seeing very rapid growth in retail savings. We think money’s coming out of the sharemarket, property trusts, equity trusts, mortgage trusts and cash management trusts with non-banks into financial institutions.” Industry strengths The CEO survey is unequivocal in terms of what sector leaders see as the key selling points for mutuals. 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. That sentiment is reaffirmed in another survey question, asking chief executives to list the advantages of the mutual banking sector over the major banks. Serv ice culture and member satisfaction levels dominate the response, collectively attracting almost 90 per cent of votes. By contrast, share of wallet and market penetration are well down the list. In terms of potential market weaknesses, the respondents feel membership growth, the dominance of the big banks and access to capital are the main stumbling blocks in the year ahead. Doughty says serv ice is clearly important, noting a recent survey which put his institution’s member satisfaction rating at 94 per cent on the back of attributes such as fair fees and ethical behaviour. “So they trust us,” he says. Mutuals such as bankmecu also give members a good deal, he says. “We have very competitive loan rates and deposit rates, and we’re a low-fee institution.” Magin agrees that great service is essential, but not enough. “Our view is that, unless you have really competitive products, you’re not going to get people to come to you. Service is a fine retention tool, but not something that’s going to acquire you any new customers.” James concurs that a mix of Will you increase spending on marketing/branding/advertising in the next 12 months? 30 25 20 15 10 5 0 Yes No Yes by a large percentage No we have other priorities re: spending 57.4% 31.9% 8.5% 2.1%