Banking Review

Competition will return in 2010. Will the major banks be ready for it?

Banks should innovate rather than hibernate in a crisis said ANZ head of online banking Sam Plowman back in March.

Plowman has since moved on to a new role heading up the direct channel at NAB, the other of the aptly named ‘two stumps’.

Australia’s banks have so far performed well in the face of the financial crisis. The big four have cemented their position, despite the ‘four pillars, two stumps’ labelling. Overall, customer satisfaction levels are up and the vast majority of household deposit funds and mortgages continue to flow to the majors. And for the most part they’ve done it without having to innovate.

What little product and pricing innovation has occurred in 2009 has come from the two stumps, ANZ and NAB, as they seek market share from their slightly more complacent and merger-distracted rivals.

It all seems too good to be true. Perhaps it’s the calm before the storm.

Competition will return to Australian banking.

Led by Mark Bouris, Yellow Brick Road is preparing to enter the home loan market with an entirely new type of funding model, not reliant on securitisation.

Some of Australia’s largest credit unions are merging, and the mutual industry is preparing a collaborative marketing campaign to take on the major banks. And don’t discount the possibility of new entrants from Asia.

When competition does return, it’s our increasingly networked economy that will drive a new movement of change.

Centre for Future Banking founder Jeff Carter says customers are increasingly likely to create their own financial future and financial experience, based on the people they are connected to (see the wrap of Jeff Carter’s presentation at last month’s Innovative Marketing conference in the Dec/Jan edition of Online Banking Review, out Friday).

In the words of ANZ’s Samantha Robinson, “Potential customers are 50 per cent more likely to believe friends, family or even people they’ve never met before they’ll believe content people like me dream up”.

Australians may be choosing the devil they know now, but given some serious alternatives, the conditions are right for change. And those institutions that have been hibernating will be the first to feel the cold.