The World Retail Banking Report, which is released this week, shows that customer satisfaction with Australian banks has fallen and now just 51.3% of customers reported having a positive experience with their bank. Australian banks have fallen from having the third highest customer satisfaction ratings in 2013 to the sixth highest this year, placing them behind both the U.S. and Canada.
As Australia & New Zealand Banking Group Limited (ASX:ANZ), Commonwealth Bank of Australia (ASX:CBA), National Australia Bank Ltd (ASX:NAB) and Westpac Banking Corp (ASX:WBC) control more than 80% of the national home loan market, satisfaction ratings are largely representative of their customers.
In the digital age where individuals can quickly find a better deal on their home loan using comparison websites, then search for customer reviews of their chosen provider before signing up online, investors may be wondering if lower customer satisfaction will lead to customers ditching the big 4 banks in favour of smaller providers.
The report noted a significant increase in customers planning to leave their primary bank in the next six months, rising in the Asia-Pacific region from 2.8% last year to 15.1% this year. This is being driven by the digital native Generation Y, which was the age demographic most likely to be planning to leave their bank.
"As the wealth and influence of Gen Y customers increases, their increased tendency to switch banks may have important implications for profitability," the report said. Additionally, fewer customers reported the likelihood of buying another product from their current bank. 23.9% of customers in the Asia-Pacific region said they were unlikely to buy another product from their primary bank, up from 4.2% last year, while just 14.3% of customers said they were likely to buy another product, down from 32.3% last year.
The impact of non-bank entities including PayPal, Uber and Peer to Peer lenders were also highlighted as a threat to banks' traditional revenue sources. "While the banks adopt different strategies to counter the rising threat from the new competitors (i.e., FinTech and Internet/technology firms), they should be mindful of the potential of these new players to disrupt the banking landscape," it said.
