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Connexus : Issue 40
No panacea Such promising research aside, the experience in the United Kingdom reveals that only eight per cent of customers switched or attempted to switch their personal accounts over the fve years to 2010, according to the Payments Council. The fgures cover a period when similar reforms were introduced in the UK. Jason Murray, general manager of products and marketing at CUA, agrees the account switching reforms will help mutuals target greater market share. "But I don't think it's going to be a panacea," he says. A "behavioural change" by banking customers is required over the long-term, according to Murray, who would have prefer red that the Australian government pressed harder with the new rules to include greater account portability. Murray's caution comes even in the knowledge that a CUA sur vey, released in March, found that 77 per cent of Australian mortgagees sur veyed would leave or start looking elsewhere if their current lender increased mortgage rates beyond offcial interest rate decisions. "If that was the case, we should have had a hell of a lot of ANZ customers coming across,” says Murray, referring to ANZ’s reluctance to pass on recent Reser ve Bank rate cuts. He admits that customers often just want to let their banks know they are not happy. "They want to send a message, but they don't necessarily want to do anything about it." All the same, the banking public should embrace the reforms, he says. "Hopefully it lives up to the expectation that it is a tick and fick type of solution and takes some of the pain out of it from their perspective." The rollout of new account switching rules poses an intriguing question. Will the ‘mutual bank’ tag help or hinder former credit unions and building societies as they tap into anti-big bank sentiment and try to steal market share away from the major banks? There are now six mutual banks in Australia: Heritage Bank, bankmecu, QT Mutual Bank, Teachers Mutual Bank, Victoria Teachers Mutual Bank and Defence Bank. Steve James, chief executive of Teachers Mutual Bank, believes campaigns to promote the new mutual bank label will complement the account switching regime. He notes that his institution has attracted about 7,000 new members in the past 12 months, including about 600 in April when the rebranding from Teachers Credit Union took hold. “They’re certainly not being turned of by the word ‘bank’,” says James. He welcomes the move to make account switching easier, saying it gives his frontline staf another chance to discuss products and services with prospective new members. Teachers Mutual is rolling out a range of new channels and incentives to aid existing members and encourage new members. They include expanded credit products; more competitive interest rates for loans and deposits; technology advances such as smartphone apps and better internet banking; and additional mobile lending services. At QT Mutual Bank in Brisbane, chief executive Mike Murphy agrees that presenting a clear value proposition will be crucial if bank customers are to switch to mutuals. “I certainly think there is a mood for change, but you have to put up a value proposition and make it worthwhile for people to actually move,” he says. To that end, QTMB is also counting on innovative or new products to distinguish it from other banking players. For example, it is one of the few Australian fnancial institutions to ofer a Rate Tracker home loan that guarantees to lower interest rates in line with Reserve Bank reductions. A capped rate car loan is proving popular, while it also ofers a Mortgage Breaker home loan that gives members the option to stop repayments for three months. “That’s something we’ve been advertising, and I think people are quite attracted to that – especially young people.” Such product diferentiation will be one of the keys to getting people to switch, says Murphy. He concedes there will be challenges under the new account switching system, including getting out the message that mutual banks are diferent to mainstream banks, equipping staf with the negotiating skills to convince potential customers that switching is easy, and informing the public through mainstream and social media formats that new mutual members are happy with their switch. “It’s about getting exposure and getting the brand out there, because we’re competing with the marketing expenditures of the majors,” he says. “But if you can demonstrate that it’s easy and people have a good customer experience from the move, I think they’ll promote it to their friends, and hopefully they’ll be using Twitter and Facebook to recommend the experience to their friends. We definitely encourage them to do that.” Answering the bank tag question We’ve taken the opportunity...to make ourselves more visible and have seen a number of people switch their banking to us. Colin Daly, Chief Executive, ECU Australia CoverStory www.abacus.org.au 29