Consumers have less trust in the big four banks, study finds

A survey of 1,000 Australian consumers by Essential Media has revealed that nearly half of respondents, or 47 per cent, have less trust in the major banks, while 14 per cent expressed greater trust in the big four.

While 18 per cent of respondents expressed greater trust in credit unions, 17 per cent in mutual banks and 15 per cent in building societies, the customer-owned financial institutions were not immune to declining trust among consumers.

According to the study, 13 per cent said they have less trust in mutual banks, while 11 per cent and 10 per cent of respondents indicated a decline in trust for credit unions and building societies, respectively.

The CEO of the Customer Owned Banking Association, Michael Lawrence, said that reduced consumer trust in the major banks is no surprise given the revelations aired during the banking royal commission hearings.

“Australians want a banking institution they can trust to put them first. Our model is solely customer-focused because 100 per cent of profits are used to benefit customers,” Mr Lawrence said.

“Through our Own Your Banking campaign, we have seen a genuine shift in consumer sentiment and a willingness to switch to a trusted alternative.”

The COBA referenced a Brisbane couple, Paul and Jo Trotter, that reportedly switched from a major bank to Toowoomba-based Heritage Bank.

“What was coming out of the royal commission was really the final straw,” Mr Trotter said.

“We just got to the point where we said we don’t care what it takes, people have to stand up and break the monopoly of the big four.”

Mr Trotter continued: “People are fearful that it will be too hard to switch, but it hasn’t been. We were prepared for it to be a bit messy, but it could not have been simpler.”

In another survey of more than 1,000 Australians conducted by Essential Media, almost a third of respondents, or 32 per cent, said they were more likely to consider switching banks in the wake of the royal commission’s findings.

The COBA study found that those aged between 35 and 54 were the most likely (35 per cent) to consider switching their banking institution, while only 6 per cent of this cohort were less likely to do so.

This was marginally higher than the 33 per cent of 18- to 34-year-olds who said they were more likely to consider swapping (with 9 per cent saying they were less likely to consider changing).

Those above 55 were the least likely to switch, with 24 per cent saying they were more likely to make the switch, while 11 per cent of this group said that the royal commission had made it less likely they would consider changing.

The latest figures from the Australian Prudential Regulation Authority (APRA) show that assets held by building societies declined year-on-year from $12.67 billion in March 2017 to $12.16 billion in March 2018, while the value of credit union assets dropped from $37.27 billion to $36.54 billion over the same period.

Assets held by mutual authorised deposit-taking institutions, on the other hand, increased year-on-year from $106 billion in March 2017 to $111.93 billion in March 2018, according to APRA’s ADI performance statistics.

What do you think about the major banks? The last 12 months have been challenging for the big banks. Rising funding costs have continued to pressure margins, leading to pricing changes towards the end of 2017. Meanwhile, regulatory measures and higher capital requirements are forcing the big four to tweak their policies. 

Which lenders have continued to deliver excellent product and service, and which lenders have communicated the myriad changes best?

This is your chance to let us know what you really think in the Third-Party Lending Report – Major Banks survey for 2018. 

[Related: Risks shift to non-banks as majors tighten up]