Australia’s top 500 enterprises by revenue not only want better value from their bank, they’re prepared to walk out of long-standing relationships to get it according to research by banking analysts East & Partners (E&P).
When surveyed by E&P for the firm’s institutional banking programme in 2007, 40.8% of chief financial officers (CFOs) identified their primary lending relationship lasting for six years or longer. Seven years on in 2014 and this figure has tumbled to only 3.5%.
Almost three quarters of all Australian institutional sized enterprises, those turning over more than A$725m (US$575m/€510m) per annum, currently maintain a primary lending relationship of less than two years.
E&P’s report details which banks are suffering the most pronounced rates of customer attrition however shifting product demand and service expectations emerge as key drivers of customer acquisition and retention.
Although the majors are deemed to be generating innovative solutions and a better understanding of institutional customer’s underlying business, perceived value for money has dropped to a record low. On a scale of 1 to 5 where 1 = satisfied and 5 = unsatisfied, overall value for money has moved lower since 2007, from a rating of 2.38 to 2.83.
The Commonwealth Bank of Australia (CBA) has successfully bucked the trend however, achieving a market leading value for money score of 2.22. The performance ranks CBA ahead of National Australia Bank (NAB) at 2.39 and HSBC at 2.59.
Australia’s ‘big four’ represents a combined 82.7% combined share of primary lending relationships, driving competitive propositioning almost exclusively between the majors; with 27.7% of the top 500 seeking particular industry expertise when selecting another provider.
“Big business displays distinctly less loyalty to their primary provider than in previous years, evidenced by 32.1% declaring better pricing as a key motivator for changing bank,” said E&P’s head of markets analysis, Martin Smith, on the results.
“Market wide product engagement reveals divergent priorities for the institutional segment relative to smaller businesses. Unsecured debt used for short-term financing requirements such as commercial paper has significantly declined in precedence for example, with product engagement dwindling from 91.4% in 2007 to a current record low of 52.3%.”
Rising interest rates, excitement around blockchain use cases and cross-border payments were all hot topics at this year's AFP conference in San Deigo.
Today CGI and GTNews have announced the launch of the fifth annual Transaction Banking survey report, which offers which offers critical insight into the corporate-to-bank relationship.
While corporates have more choice when it comes to choosing financial services, the core relationship between banks and businesses hasn't changed, argues Michael Cummins, head of treasury solutions at Citizens Bank.
Direct carrier billing is currently a competitive payments industry in Europe, but will it flourish under PSD2? EE and Microsoft think so.