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Over 2m Aussies ready to switch financial institutions

Over 2m Aussies ready to switch financial institutions

More than 3.1 million Australians are dissatisfied with their main financial institution, and 2 million of which are looking to switch providers in the upcoming months, according to a new study.

A new study by Nielsen has reinforced the finding that discontent among consumers towards their financial services providers has been growing steadily against the backdrop of the ongoing royal commission.

Nielsen has reported that more than 3.1 million Australians have been dissatisfied with their main financial institution (MFI) over the 12 months to the end of March 2018, with 50 per cent saying that they would not recommend their MFI to others and one in four expressing their distrust in the way banks invest their money.

Additionally, more than 2 million Australians said that they plan on switching providers in the coming six months. An earlier study from Essential Media showed that almost a third of respondents, or 32 per cent, were more likely to consider switching banks in the wake of royal commission revelations.

Generation X, or those aged between 35 and 54 years, who generally have the need for an array of financial products (including mortgages, insurance policies and bank accounts), was found to be the most dissatisfied, with 54 per cent unwilling to recommend their MFIs to family and friends, according to Nielsen.

Speaking of the decline in customer satisfaction, Nielsen’s head of financial services and insurance, Jo Brockhurst, said that there is a “huge gulf” between customer expectations and service delivery, which the global research firm is calling the “promise gap”.

“When you overlay the marketing and brand attributes of the financial institutions compared to the actual experiences, it becomes apparent there is a huge gulf between what the customer expects and what is being delivered,” Ms Brockhurst said.

“At Nielsen, we are calling this ‘The Promise Gap’, where the brand marketing and values of a company are not in sync with the customer’s end experience.”

According to the research firm, the best approach to addressing the “promise gap” comprises of four components: brand, experience, marketing and innovation.

“Our research indicates that while most Australians nominate better interest rates and lower fees as the primary reasons for switching to another financial institution, other factors such as recommendations from friends and professionals, better customer service and larger product offerings also factored into the decision,” Ms Brockhurst said.

When asked why they would recommend their main financial institutions to others, the top five reasons were “easy to deal with” (36 per cent), “like the service” (27 per cent), “good value services/products” (26 per cent), “like the internet bank service” (24 per cent), “like the reputation of the company” (20 per cent) and “like the staff” (20 per cent).

Other reasons provided include “good product features”, “large branch network” and “like the feel of branch outlets”.

Ms Brockhurst said that there is a “huge opportunity” for financial services providers to reassess various components of their brand strategy including customer experience, staff training and product/service offerings.

However, the head of financial services added that brand reputation is equally important.

“Brand trust reduces customer churn and increases customer engagement,” Ms Brockhurst said.

“With the latest scandals hitting the headlines on a daily basis, it’s reasonable to assume more Australians will be closely monitoring their bank’s services and products and considering whether to switch to an alternative.”

Tim Newman, head of customer service and experience at ING, said that customer advocacy is particularly important for the lender and is a “higher bar than customer satisfaction”.

“The willingness of our customers to recommend ING to family and friends is the ultimate test of whether our products and services are helping our customers get ahead,” Mr Newman said.

ING was among the only two banks to rank in the top 10 most trusted brands in Australia, the other being Bendigo Bank, according to a recent report by Roy Morgan. Bendigo Bank and ING took the third and 10th spots, respectively.

Growing dissatisfaction with the finance industry

Many studies have demonstrated a downward trend in customer satisfaction with financial institutions, particularly since the royal commission kicked off in March and interest rates were hiked.

For example, according to Roy Morgan’s latest Customer Satisfaction – Consumer Banking in Australia report, customer satisfaction with banks dropped to 78.3 per cent in June, compared to 82.3 per cent in January, prior to the commencement of royal commission hearings.

The June figure is also the lowest recorded satisfaction level since April 2012, though it is still above the 60 per cent recorded in January 2001.

Correspondingly, customer dissatisfaction has risen to its highest level since April 2012, going from 4.6 per cent in January to 6.2 per cent in June.

Further, the Net Promoter Score (NPS) also declined over the same period, falling from 0.49 to -4.03.

Meanwhile, Roy Morgan’s recent Advocacy Report – Financial Institutions June 2018, which surveyed 4,000 bank customers, found a 4.6 per cent drop in the number of customers that were highly likely to recommend their banks to family and friends in June. In February, prior to the commencement of the royal commission, 59 per cent of customers were high advocates, compared to 54.4 per cent in June.

Roy Morgan’s findings are in line with those by Essential Media, which recently surveyed 1,000 Australian consumers. The survey 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 Essential Media study, 13 per cent said that they have less trust in mutual banks, while 11 per cent and 10 per cent of respondents indicated a decrease in trust for credit unions and building societies, respectively.

[Related: Bank head calls for calm amid ‘embarrassing’ RC]

Over 2m Aussies ready to switch financial institutions
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