Rob Goudswaard: vote with your feet

CUA boss on why the bank levy is making Australians more aware of customer-owned banks

Rob Goudswaard: vote with your feet
CUA boss on why the bank levy is making Australians more aware of customer-owned banks 

Treasurer Scott Morrison made a number of announcements in the Federal Budget in May to ensure customers get a fairer deal from the banks, and to promote greater competition and accountability in our sector. 

The announcement that has generated the most attention is a levy on our five biggest banks – the Big 4 and Macquarie Bank. The Government positioned this as being important for budget repair and helping to “even up the playing field for smaller banks”. It is moving quickly to have the levy in place from 1 July 2017.

Last week, the CEO of the Customer Owned Banking Association (COBA), Mark Degotardi, appeared before the Senate Economics Committee Inquiry to express our sector’s support for the levy.

The levy will go some way to helping offset the funding cost advantage that these banks have relative to smaller lenders and member-owned banking providers like CUA.

"What we do know is that Australians who are worried about wearing the cost of the levy have a choice"

Currently, the major banks are able to access wholesale funding at a much lower cost than regional banks, mutual banks and credit unions, because they benefit from an implicit Government guarantee. This guarantee is an outcome of their position as systemically important banks that are deemed “too big to fail”. It makes sense that the levy applies to those banks which benefit financially from this government guarantee.

What does this mean for competition though? We don’t yet know how each of the banks will recoup the cost of the levy – whether it may be through adjusting interest rates, reducing shareholder dividends or cutting costs in other areas. 

What we do know is that Australians who are worried about wearing the cost of the levy have a choice. There are around 80 member-owned banking providers, including CUA, which is the largest credit union in Australia and provides financial, health and insurance solutions to almost 500,000 Australians.

So why aren’t consumers voting with their feet, and their wallets? Research commissioned by COBA in January found 36% of respondents were thinking about shifting their home loan to another lender in the next 12 months. Of those who had not moved banks, one in three were worried the process would be too hard, while one in four said they “just hadn’t got around to it”. 

But this perception that changing banks is hard is not usually the reality. Consumers have never had more options to shop around and compare the alternatives. 

The member-owned sector is helping to educate consumers on their options, with new campaigns like COBA’s Check Out the Competition (www.checkoutthecompetition.com.au) and the ‘Switch it up’ initiative led by the Business Council of Cooperatives and Mutuals (www.switchitup.com.au). 

Other consumers may consult a mortgage broker, with this channel accounting for more than 50% of home loans issued in Australia. Around 40% of CUA’s home loans come via the broker channel. There are also comparison websites which rate the best value banking products, such as Mozo which last week recognised CUA for ‘Customer Satisfaction’ in everyday banking and being ‘Highly Trusted’.

In short, the bank levy may give consumers another reason to shop around for good value and a better customer experience.

Rob Goudswaard is the Chief Executive Officer of CUA, Australia’s largest credit union, and has over 36 years’ experience in the banking and finance sector in Australia and overseas. CUA provides banking, general insurance and health insurance to around 500,000 Australians and has more than $13 billion in assets. CUA has a national presence through more than 50 branches along the east coast and in Perth, and via the broker channel.