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Connexus : Issue 40
Grabbing market share While there is justifable circumspection about the likely impact of the July 1 changes, many mutuals are seeking to take advantage of the new account switching regime. ECU Australia, a Cairns-based credit union with branches down the easter n seaboard to Brisbane, is hopeful the reforms will give it a boost in tough markets because of a tourism downtur n that is hurting Queensland's far north region. Chief executive Colin Daly says the account switching changes are a positive factor that gives ECU a chance to capture greater market share on top of the strong membership it has through traditional links with the electricity industry. "The new environment does offer us an opportunity," says Daly. "Clearly the banks have had a great deal of focus on themselves, particularly regarding interest rate changes and the non-alignment these days of their interest rates to the RBA's cash rate movements. We've taken the opportunity a couple of times when that has come up to make ourselves more visible and have seen a number of people switch their banking to us in that time." Robert Keogh, chief executive of Community CPS, believes the changes will encourage a market in which people seek a closer relationship with their fnancial institution. "It's a relationship that puts consumers in the box seat, and that goes right to the very heart of mutuals," he says. "So I think mutuals are well positioned to trade on their strengths in this environment." Keogh says anecdotal evidence from branches confrms that more people are considering abandoning the major banks because "they want to do business with an organisation that puts them frst”. However, new members will not just walk in the door. "[It] means we have to respond very quickly to their needs. So there are both challenges and opportunities in this account switching. "In an organisational sense, we'll be making sure our teams are able to respond to the opportunities that arise and ensure we're really on the front foot CoverStory Like many smaller fnancial institutions, WAW Credit Union can’t match the marketing budgets of the big banks. It is playing it smart by riding on the back of a splurge of advertising as the federal government and major banks promote the new account switching rules. Deputy chief executive Michael Mack says it will be crucial for cash-conscious mutuals to leverage of the “free press” of government media campaigns as it seeks to sell the reforms. “For us, that’s a really efcient spend to get maximum traction in this space,” he says. WAW Credit Union has been serving north-east Victoria and southern NSW since 1956 and has about 23,000 members. While Mack welcomes the account switching changes and thinks they are potentially a tremendous initiative for consumers, he concedes it is unlikely there will be a sudden exodus of bank customers who want to move across to mutuals – at least in the short term. “I think, in all practicality, the impact is going to be limited. There is an enormous amount of inertia in the account switching process,” he says. “The new regulations deal with part of that inertia, but it’s going to take longer for consumer psychology to change.” Not that he is being defeatist. It’s up to credit unions to gradually claw back market share, and to that end the new laws present “another angle” to present the mutual story to the public and let them know it is now easy to switch fnancial institutions. Over the past 12 months, a small team at WAW has been working out how to best take advantage of the reforms. It has also taken part in Australian Payments Clearing Association initiatives to establish a centralised account-switch mail box to smooth out bumps in the process. WAW has been targeting local media to reinforce how simple switching has become and it has been preparing staf for the changes. “It does need a dedicated resource because, despite [Treasurer] Wayne Swan’s tick and fick idea, there is a bit of work to be done in the background.” While WAW tries to have its strongest value proposition out in the market at all times, it does plan to release some product enhancements earlier than originally anticipated to take advantage of the account switching publicity. “We want to make sure people are looking at our very best ofer.” Leveraging o publicity Mutuals are well positioned to trade on their strengths in this environment. Robert Keogh, Chief Executive, Community CPS 30 Connexus