Big banks think small
Despite this stranglehold, however, there is one area in which the smaller players have the upper hand: they have happier customers.
For more than a decade, Roy Morgan figures have shown that customers of building societies, credit unions and foreign banks are happier with their financial institution than those of big banks.
So what do the little guys do that makes their customers so chirpy?
Experts believe there are a few reasons for the trend - and it seems the banks are cottoning on to what has worked for the smaller institutions.
For one, customer-owned banks such as building societies and credit unions have a reputation for providing good service. Because they don't have to pay dividends to shareholders, they have generally not cut costs as aggressively. For example, banks infuriated many customers with a wave of branch closures in the 1990s and the increasing use of overseas call centres.
The other area in which smaller players have the upper hand is their local presence. Customer-owned financial institutions often come from a specific geographic area or serve an occupational group, such as teachers or police officers. Big banks can't match these characteristics.
But though we love complaining about banks, Roy Morgan says satisfaction with them has steadily climbed to almost 80 per cent after falling below 60 per cent early last decade. There's a good chance this recovery has come about because, at least in part, the big banks are learning from their smaller rivals.
After a backlash over branch closures, for instance, their numbers have actually expanded, with banks opening a total of 65 branches around the country in 2012, the largest expansion in three years.
The big guys have also tried to borrow some of the small lenders' tactics, such as having a more "local" presence. Westpac promotes its Bank of Melbourne and St George brands to customers who don't want to bank with a big lender; Commonwealth Bank has Bankwest.
But research suggests customers are not "tricked" by this. Most people know they are still banking with a company that's owned by one of the giants. Nonetheless, customers of these smaller offshoots seem to be happier than those of the big four, who are still a relatively gloomy bunch.
Happy campers
Frequently Asked Questions about this Article…
Roy Morgan data show customers of building societies, credit unions and foreign banks have been happier for more than a decade. The article says smaller, customer‑owned institutions have a reputation for better service, haven’t faced the same pressure to cut costs (they don’t pay dividends to shareholders) and often maintain a stronger local presence — all factors that tend to boost customer satisfaction.
Roy Morgan figures cited in the article indicate that satisfaction with big banks fell below 60% early last decade but has steadily climbed since, reaching almost 80%. At the same time, customers of building societies, credit unions and foreign banks have consistently reported higher satisfaction for more than a decade.
According to the article, big banks have adopted tactics used by smaller lenders, such as expanding local branches and promoting regional brands. For example, Westpac promotes its Bank of Melbourne and St George brands and Commonwealth Bank uses Bankwest to appeal to customers seeking a more local feel.
Yes. The article notes that branch closures in the 1990s and increased use of overseas call centres infuriated many customers. In response to backlash, big banks expanded their branch networks — opening a total of 65 branches around the country in 2012, the largest expansion in three years.
Research cited in the article suggests customers aren’t 'tricked' by those brands. Most people know they’re still banking with a company owned by a major bank, although customers of those smaller offshoots still appear to be happier than customers of the big four.
Customer‑owned banks in the article refer to building societies and credit unions. Because they don’t have to pay dividends to outside shareholders, they’ve generally not cut costs as aggressively and tend to emphasize service and local relationships — which contributes to higher customer satisfaction.
The article explains that smaller, customer‑owned institutions often come from a specific geographic area or serve particular occupational groups (for example, teachers or police officers). That local or specialised focus helps them build closer relationships with customers and deliver service that feels more personalised than large national banks.
The article points to a steady recovery in big bank satisfaction (from below 60% to almost 80%) and concrete actions such as opening 65 branches in 2012 and promoting local brands like Bank of Melbourne, St George and Bankwest. These moves suggest big banks are borrowing tactics from smaller lenders to win back customer goodwill.
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