Switch banks? No thank you, it's still just too hard
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.
Frequently Asked Questions about this Article…
Take-up has been low — the article reports only about 320 people a week using the government bank switching scheme, with over 15,500 people using it in its first 11 months.
The account switching service, set up under Labor's 2010 banking competition reforms, lets customers change banks by filling out a single form, but it only applies to transaction accounts.
No. The single form does not automatically transfer direct debits and credits — customers can ask their old bank for a list of direct debits and credits and provide that list to their new bank to arrange transfers.
Industry figures say switching remains complex because many direct debits and credits are set up directly with telcos and utilities in Australia (not via the bank), customer inertia is high, and some administrative hurdles still exist.
According to Teachers Mutual Bank chief executive Steve James, only about 30% of people who apply to use the service actually complete the switch.
About one in 10 switching applications were rejected by the losing bank because the customer's signature on the switch form did not match the signature on file.
No — past initiatives have had poor take-up. The article notes a 2008 program was used by fewer than 6,000 people over several years.
Experts quoted in the article say limited take-up underlines broader competition issues: account switching is seen as a small tool to promote competition, but the low usage highlights the need for a wider review of the financial sector.
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