What does falling customer satisfaction mean for Australian banks?

Will lower satisfaction lead to customers ditching Australia & New Zealand Banking Group Limited (ASX:ANZ), Commonwealth Bank of Australia (ASX:CBA), National Australia Bank Limited (ASX:NAB) and Westpac Banking Corporation (ASX:WBC)?

| More on:
a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The World Retail Banking Report, which is released this week, shows that customer satisfaction with Australian banks has fallen and now just 51.3% of customers reported having a positive experience with their bank. Australian banks have fallen from having the third highest customer satisfaction ratings in 2013 to the sixth highest this year, placing them behind both the U.S. and Canada.

As Australia & New Zealand Banking Group Limited (ASX:ANZ), Commonwealth Bank of Australia (ASX:CBA), National Australia Bank Ltd (ASX:NAB) and Westpac Banking Corp (ASX:WBC) control more than 80% of the national home loan market, satisfaction ratings are largely representative of their customers.

In the digital age where individuals can quickly find a better deal on their home loan using comparison websites, then search for customer reviews of their chosen provider before signing up online, investors may be wondering if lower customer satisfaction will lead to customers ditching the big 4 banks in favour of smaller providers.

The report noted a significant increase in customers planning to leave their primary bank in the next six months, rising in the Asia-Pacific region from 2.8% last year to 15.1% this year. This is being driven by the digital native Generation Y, which was the age demographic most likely to be planning to leave their bank.

"As the wealth and influence of Gen Y customers increases, their increased tendency to switch banks may have important implications for profitability," the report said. Additionally, fewer customers reported the likelihood of buying another product from their current bank. 23.9% of customers in the Asia-Pacific region said they were unlikely to buy another product from their primary bank, up from 4.2% last year, while just 14.3% of customers said they were likely to buy another product, down from 32.3% last year.

The impact of non-bank entities including PayPal, Uber and Peer to Peer lenders were also highlighted as a threat to banks' traditional revenue sources. "While the banks adopt different strategies to counter the rising threat from the new competitors (i.e., FinTech and Internet/technology firms), they should be mindful of the potential of these new players to disrupt the banking landscape," it said.

Motley Fool contributor Joshua Anderson has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »