November 11, 2010
Are Australian banks slipping into psychopath territory?
OPINION
In his 2004 book and documentary The Corporation, legal scholar Joel Bakan argues if the corporation were a person, it would be a psychopath.
Bakan makes his case, with emotive language and images, that the corporation is self-interested, inherently amoral, callous and deceitful. The corporation breaches social and legal standards to get its way; it does not suffer from guilt, yet it can mimic the human qualities of empathy, caring and altruism.
Are Australian banks slipping into psychopath territory? Reading the headlines of the past fortnight, you could be forgiven for thinking so.
‘Sneaky’, ‘selfish’, ‘arrogant’ and ‘greedy’ are just some of the terms being thrown around by commentators and customers of the Commonwealth Bank, following its decision to raise mortgage interest rates by 0.45 per cent in one hit.
Of course, it’s easier to attack a corporation than it is to look a person in the eye and dress them down. Which is probably why Commonwealth Bank chief Ralph Norris, after a week out of the country, went on the front foot defending the bank’s decision to the media, staff and customers. And why Westpac chief Gail Kelly says she will front December’s Senate inquiry into banking competition, and is “looking forward to it”.
Banks will be keeping a close eye on customer satisfaction levels and retention rates in coming months, but if recent history gives any indication, there will be little movement.
In a 2009 survey conducted for Retail Banking Review, research group CoreData found half of the St. George customers surveyed expected the Westpac takeover to result in increased fees, and a similar number were concerned about the overall reduction in competition in Australian banking. Slightly more than seven per cent said they planned to leave the bank.
Yet in Westpac’s recent annual results, it revealed instead of the four per cent customer attrition it had budgeted for last year, St. George actually grew its customer numbers.
There’s little doubt more competition would be good for customers, and switching is not easy, but until customers start to vote with their feet, there’s little incentive for banks to behave more humanely.
Written by: Charis
Filed Under: Best practice, Featured, The Better Banking Blog
Tags: bank behaviour, bank mergers, bank rates, Commonwealth bank, St George, Westpac
Trackback URL: http://www.bankingreview.com.au/2010/11/are-australian-banks-slipping-into-psychopath-territory.html/trackback
Sharyn Evans
November 11, 2010 at 3:11 pm
The problem with today’s society is that they’re very apathetic to moving their business elsewhere – it all becomes too hard. Make it easier for borrowers to shift their business – and they WILL move if they become too disillusioned with their suppliers.
Theresa
November 12, 2010 at 7:12 am
It will be interesting to see the impact MAMBO has on portability over-time. Will merchants embrace BPay on a larger scale meaning consumers can then rely less on payment methods that have to be managed at both ends like card payments and move to consumer controlled automated payment such as BPay under the MAMBO system.
Todd ONeill
December 8, 2010 at 6:00 am
It’s very easy to dis-associate responsibility for decision making by calling these corporations ‘the banks’. Each of these businesses have boards and senior management and it is these ‘people’ that make decisions.
Frontline staff of course can do nothing more than either carry out the decisions of their management, or quit if they disagree. Do corporations act like psychopaths ? Abosolutely, why, because their collective management is intent on achieving the goal of the business – to make better returns for their investors, with zero compassion for those that get in their way of doing so.
The second issue of moving banks in the event of dissatisfaction is one that is problematic due to real and imagined constraints.
Thre reality is that the time and effort it takes to research the competition, open new accounts or credit cards and loans and go through the process far outweighs the actual costs. Even home loans do not cost that much to shift in real terms. It’s the time and effort in most cases.
Equally important is the fact that for years bankers have been cross-selling products to clients in an effort to retain their business. Sell them 3 or more products and it’s too hard to leave.
The first imagined problem is that there is no competition -in fact there are over 150 places that customers could switch to if they wanted to.
The second is the cost. Most people haven’t a clue how much it costs to leave, but media stories tell them it’s expensive. In relative terms they probably spend more on coffee each year than the cost of shifting their mortgage to get a better rate and better service.