Switch banks? No thank you, it's still just too hard
Only about 320 people a week are using a government scheme designed to take the hassle out of changing banks, with many customers still deterred by the complexity of switching.
After the scheme began last July, a Treasury spokesperson said "over 15,500" people had used it in its first 11 months, and the average monthly turnover of deposit accounts had also risen by 6.2 per cent.
But industry representatives said the take-up rate was underwhelming. Some 3.5 million accounts were already "switched" each year before the scheme started operating.
The chief executive of Teachers Mutual Bank, Steve James, said the process of changing banks remained complex, and most people who applied did not end up switching.
"We get people applying, but probably only about 30 per cent of the people actually do the switch at the end of the day. The system's still a little complicated for most customers," he said.
The service - which only applies to transaction accounts - was set up as part of Labor's 2010 banking competition reforms.
It allows people to change banks by filling out a single form, but Mr James said this did not automatically transfer direct debits and credits. For this to occur, customers can ask their bank for a list of all direct debit and credits, which they can then give to their new bank.
Mr James said about one in 10 applications to switch were rejected by the bank that was losing a customer because their signature was different to the one on file.
Programs seeking to encourage Australians to change banks have a poor track record. A 2008 initiative was used by fewer than 6000 people over several years.
Australian Bankers' Association chief executive Steven Munchenberg said surveys showed most people were satisfied with their banks, and switching was made more difficult because of the way people set up their direct debits and credits.
"In other countries if you want to set up a direct debit with your telco or your utility, you do it with the bank. Here in Australia you do it directly with your telco or your utility," he said.
With big banks controlling most of the market the limited take-up rate underlined the need for a sweeping review of the financial sector, the acting chief executive of the Customer Owned Banking Association, Mark Degotardi, said.
"Account switching is one small tool to help promote competition," he said.
But the research manager at Canstar, Mitchell Watson, said the figure highlighted people's natural inertia when it came to changing lenders.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free