Trends in High Interest Savings Accounts in Australia

Transcription

1 A Datamonitor report Trends in High Interest Savings Accounts in Australia A Product Type Undergoing Transformation Published: May-08 Product Code: DMFS2248 Providing you with: A comprehensive overview of the Australian high interest deposit market Insights into Datamonitor's consumer survey of Australian savings account holders Discussions on traditional savings accounts, online savings accounts, CMAs, CMTs, term deposits and offset accounts Use this report to... Market overview, analysis of consumer behaviour, competitor dynamics and future developments Improve your strategic position using Datamonitor's in-depth analysis of the Australian high interest savings account market

2 Trends in High Interest Savings Accounts in Australia DMFS2248 Introduction The high interest deposit market is undergoing rapid change, driven by competition and technology. Online savings products have allowed a range of new players to enter the market, and have forced interest rates upward. The currently turbulent financial markets have sparked renewed interest in deposits, and so the high interest deposit market is set to continue being very competitive. Trends in High Interest Savings Accounts in Australia is essential reading for anyone seeking to gain a deeper understanding of the Australian high interest deposit market. The report provides a market overview, analyzes current competitive dynamics between providers and forecasts future developments. Key findings and highlights Online banking made managing banking business even easier for consumers, as well as enabling new competitors to enter the market. Foreign banks, previously hampered by their lack of branch coverage, could now compete with the major Australian financial institutions. At the same time that lenders have refocused their efforts to attract deposit customers and become more risk-averse, consumers have become more cautious as a response to the uncertain financial outlook. A shaky stock market has helped shift consumer focus toward deposits. It is thus clear that both supply and demand for deposit products is rising. The new Australian government has pledged to restrict switching fees for financial products, in a bid to make switching easier for consumers, to encourage competition in the market. Another potential legislative change could be a mandate that banks simplify the process of carrying over direct debits when consumers wish to switch accounts. Reasons to buy Improve your strategic position using Datamonitor's in-depth analysis of the Australian high interest savings account market Understand the unique challenges the high interest deposit market is facing, and benefit from forecasts of future product trends Gain insight into the current mindset of Australian high interest deposit customers Contact us... From Europe: tel: fax: fsinfo@datamonitor.com From the US: tel: fax: usinfo@datamonitor.com From Asia Pacific: tel: fax: apinfo@datamonitor.com

3 Sample pages from the report Market Context Figure 4: Total bank deposits in Australia have grown strongly, ,400 Total bank deposits in Australia 1,200 1,000 A$ billions Market Context Jan-90 Jan-91 Jan-92 Jan-93 Jan-94 Jan-95 Jan-96 Jan-97 Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Figure 6: Average interest rates on bank CMAs have risen, Source: Datamonitor, RBA D A T A M O N I T O R Bank CMAs (A$10,000) Bank CMAs (A$50,000) 7.00% Jan-05 Jan-06 Jan-07 Jan-08 Some of the strongest growth and most cutting-edge product innovation has occurred in the area of high interest savings 6.00% accounts. There are a number of different products competing in this space, as discussed below. 5.00% There are many competing products in the high interest deposit area Deposit account customers who are looking for a higher rate than that achieved in a transaction 4.00% account, yet quick access to their funds, and minimized risk, currently have several alternatives available to them in Australia. The main products 3.00% competing in the high interest savings account space are: Traditional savings accounts also called bonus savings accounts, these accounts 2.00% have a long history in the Australian marketplace, and are still popular, although they have lost ground to online accounts. They can be accessed in a branch, and often offer a rate of interest that rises if specific conditions 1.00% have been met, such as Average interest rates specified deposits being made, or a lack of withdrawals. 0.00% Online savings accounts these accounts can only be accessed via the internet, and often need to be linked to a separate transaction account. Rates are often higher than on a traditional savings account, and typically come with fewer conditions on maintaining a balance. This account type has shown the strongest growth in the Figure 13: Fees and rates are the most important considerations if switching account high interest deposit market. Source: Datamonitor, RBA D A T A M O N I T O R If you were going to change your high interest savings account, which of the following would be important considerations? Oct-06 Nov-06 Dec-06 Jan-07 Feb-07 Mar-07 Apr-07 May-07 Jun-07 Jul-07 Aug-07 Customer Focus Sep-07 Oct-07 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 70% 64% At the same time that lenders have refocused their efforts to attract deposit customers and become more risk-averse, consumers have become more cautious as a response to the uncertain financial outlook. A 60% shaky stock market has helped 56% to shift consumer focus toward deposit products, as have cash target rate rises. It is thus clear that both supply and Trends in high interest savings accounts in Australia DMFS2248/ Published 05/ % demand for deposit products is rising. Datamonitor. This brief is a licensed product and is not to be photocopied Page 15 40% 30% 20% 10% Proportion of savings accountholders 38% 38% 34% 24% 0% Fees Rates Internet banking Branches Service reputation Bundle with transaction account Source: Datamonitor Australian Financial Services Survey D A T A M O N I T O R It is interesting that fees are more commonly mentioned than rates; as competition ensures that rates are similar between providers, fees and other terms will become increasingly important differentiators. Product bundles have become more prevalent and are mentioned by 24% of respondents as an important consideration when switching. Trends in high interest savings accounts in Australia DMFS2248/ Published 05/2008 Datamonitor. This brief is a licensed product and is not to be photocopied Page 18 Online high interest savings accountholders have distinctive characteristics Online arranging savings accountholders are younger, better educated and have a higher income In the Datamonitor survey respondents were asked about the main way in which they arranged their financial products, including making the first contact, as well as submitting relevant information. The demographics of accountholders vary between those who arrange their accounts online and those who use different channels. High interest savings accountholders who arranged their main account online are more likely to be in a younger age bracket, more likely to have a degree and more likely to have $100,000 or more in household income. Figure 14 below illustrates the most important demographics differences between the groups. Trends in high interest savings accounts in Australia DMFS2248/ Published 05/2008 Datamonitor. This brief is a licensed product and is not to be photocopied Page 25 Request more sample pages...for FREE! From Europe: tel: fax: fsinfo@datamonitor.com From the US: tel: fax: usinfo@datamonitor.com From Asia Pacific: tel: fax: apinfo@datamonitor.com

4 Trends in High Interest Savings Accounts in Australia DMFS2248 Table of contents OVERVIEW Catalyst Summary EXECUTIVE SUMMARY Market context - There are many competing products in the high interest deposit area - Technology changed the playing field for savings accounts - Global financial conditions have sparked intensified interest in deposits Customer focus - Most accountholders choose their provider based on rates - Accountholders who arrange savings online are younger, better educated and have a higher income - BankWest has the most satisfied customers of the major providers Competitive dynamics - Margins are relatively low for deposit products - Foreign banks and regional banks have grown their share of household deposits - CBA is the market leader for high interest savings deposits Future focus - Savings products will continue evolving - In time savings accounts and transaction accounts will merge into a single product MARKET CONTEXT Savings accounts have benefited from the increased availability of banking - Banking accessibility has increased strongly since the 1980s - Bank branch numbers declined during the 1990s but have recently increased slightly - Technology changed the playing field for savings accounts - Total Australian bank deposits have grown strongly There are many competing products in the high interest deposit area Global financial conditions have sparked intensified interest in deposits CUSTOMER FOCUS A broad range of Australians have high interest savings accounts - Most Australian consumers now hold at least one high interest savings account - Close to half of Australian savings accountholders have $5,000 or more in their main account - Half of all savings accountholders make weekly or monthly deposits - More than half of savings accountholders have no specific purpose for saving Interest rate drives provider choice when choosing a high interest savings account - Most accountholders choose their provider based on rates - Bank advisors and the internet are the most common sources of information - Fees and rates are the most important considerations when switching account Online high interest savings accountholders have distinctive characteristics - Online arranging savings accountholders are younger, better educated and have a higher income - Accountholders who arrange their savings online are more financially savvy - Savings accountholders with online only access are more active customers Satisfaction with high interest savings account providers varies - BankWest has the most satisfied customers of the major providers - Satisfaction metrics are especially important for high interest savings account providers COMPETITIVE DYNAMICS Providers mainly compete on the basis of rate and accessibility of funds - Interest rates have many variations in the market - Accessibility of funds differs between products Competition has led to low margins in the Australian market - Margins are relatively low for deposit products - Online accounts have revolutionized the market for deposits New entrants have challenged the big Australian banks - The five largest Australian banks hold 78% of household deposits...fierce competition in the Australian market for high interest deposit products has led to increased interest rates, and as a result, product margins are relatively low for these products... Petter Ingemarsson, Trends in High Interest Savings Accounts in Australia

5 - Foreign and regional banks have grown their share of household deposits - CBA is the market leader for high interest savings deposits FUTURE FOCUS Savings products will continue evolving - Interest rates offered are set to stay high and margins low - Product terms will continue to become more relaxed - Online accounts will become more prevalent - Product bundling has important implications for product development In time the savings account and the transaction account will merge into one product - There are signs that savings accounts and transaction accounts will merge into a single product - The convergence of account types will have profound effects on the Australian deposit market Government initiatives will drive new product innovation - The Australian government has committed to making financial product switching easier - The recently proposed First Home Saver Account scheme will create a new product category APPENDIX Supplementary data Definitions - CAGR - Cash rate target - Foreign subsidiary banks Methodology Further reading Ask the analyst Datamonitor consulting Disclaimer LIST OF TABLES Table 1: Highest interest rate available from institutions varies Table 2: Banking access points in Australia, Table 3: Number of bank branches in Australia, Table 4: Total deposits of foreign subsidiary banks, Table 5: Total bank deposits in Australia, Table 6: Average bank CMA interest rates, Table 7: How many high interest savings accounts do you have? Table 8: How much money do you currently have in your main high interest savings account? Table 9: How often do you deposit money in your main high interest savings account? Table 10: Do you have a specific purpose/purposes for your high interest savings account? Table 11: Why did you choose this provider of high interest savings account? Table 12: What sources of information did you use when choosing your main high interest saving account? Table 13: If you were going to change your high interest savings account, which of the following would be important considerations? Table 14: Demographics of high interest savings account customers Table 15: Financial attitudes of high interest savings account customers Table 16: Account behaviour of high interest savings account customers Table 17: Attitudes of high interest savings account customers Table 18: Satisfaction with high interest savings account provider Table 19: Average interest rates of the largest providers for different products, March 2008 Table 20: Average margins of the largest providers for different products, (Table 1 of 3) Table 21: Average margins of the largest providers for different products, (Table 2 of 3) Table 22: Average margins of the largest providers for different products, (Table 3 of 3) Table 23: Total bank household deposits, February 2008 Table 24: Growth rate in household deposits for different institutions, Table 25: Competitor market share of high interest savings deposits LIST OF FIGURES Figure 1: The number of Australian ATM and EFTPOS terminals has grown strongly, Figure 2: The number of bank branches declined during the 1990s, Figure 3: Total deposits on the books of foreign subsidiary banks have grown, For a full list of tables and figures please refer to consumer survey highlights how 53 per cent of Australian high interest savings account holders had no specific purpose for their saving... Petter Ingemarsson, Trends in High Interest Savings Accounts in Australia

6 Trends in High Interest Savings Accounts in Australia DMFS2248 Datamonitor: Your total information solution Datamonitor is a premium business information company helping 5,000 of the world's leading companies across the Automotive, Consumer Markets, Energy, Financial Services, Healthcare and Technology sectors. Our products and services are specifically designed to support our clients key business processes from corporate strategy to competitive intelligence. We provide an independent and trustworthy source of data, analysis and forecasts to improve these processes and ultimately, to help grow your business. Corporate Strategy and Business Planning Quality Data Make more effective strategic and business decisions Product Development and Commercialization Targeting and Influencing the Market Expert Analysis Accelerate delivery of commercial success Assess and influence your commercial and market environment HELPING TO GROW YOUR BUSINESS Market and Competitive Intelligence Future Forecasts Maintain or obtain critical competitive advantage Nothing speaks louder than our clients Abbey ABN AMRO AIB Bank AIG Alliance & Leicester American Express AXA Bank of Ireland Barclays BNP Paribas Bradford & -Bingley BUPA Capital One Citibank Commerzbank Co-operative Group Crédit Agricole Crédit Lyonnais Credit Suisse Deutsche Bank Dresdner Bank Fortis Friends Provident Gartmore GE Group Halifax Plc HBOS HFC HSBC ING Intelligent Finance Invesco JP Morgan Legal & General Lloyd s of London Lloyds TSB Marsh MBNA Merrill Lynch National Australia Group Nationwide Building Society NFU Mutual NM Rothschild Nordea Asset Management Prudential Rabobank Royal & SunAlliance Royal Bank of Scotland Scottish Widows Skandia International Société Générale Standard Life Group UBS VISA Western Union Zurich Group...For 91 per cent of our clients, Datamonitor research helps their company to respond to competitive threats... Source: Datamonitor Customer Research

7 Interested in this topic? Retail Banking in Asia-Pacific is a highly profitable market segment in the world s financial hot-spot. In 2006 the competition heats up even further as the region is placed under increased scrutiny by world-dominating financial institutions. Traditional market shares of plastic card and mortgage markets will be under threat as cross-border competition intensifies. Datamonitor s Retail Banking in Asia-Pacific portfolio offers analysis of successful strategies, highlights potential opportunities and forecasts markets to 2010 it is a definitive guide for any serious market player. Other reports available in this series Bundling in Retail Banking in Australia Draws upon Datamonitor's Australian Financial Services Consumer Survey to examine the propensity of consumers to bundle various services with one provider; the drivers behind this and the most suitable services to bundle. Published: Feb-08 Product Code: BFFS0602 Online Banking Strategies: Best Practice from Europe This report provides key market and competitor statistics for online banking for a sample of European countries and draws on best practice examples to illustrate the rapidly changing world of online banking. Published: Nov-06 Product Code: DMFS2144 Household Deposit Accounts in Australia 2006 This report analyses the deposit account market in Australia. It looks at the growth of the market. The report includes estimates of market shares of both the transaction and nontransaction account market and also product market shares. Published: Aug-06 Product Code: DMFS1953 For more information about our products visit Subscribe to Monitor A monthly update of Datamonitor's new financial services products, delivered to you by . monitor@datamonitor.com

8 Trends in High Interest Savings Accounts in Australia DMFS2248 Place your order now... Fax back to (from Europe), (from the US) or (from Asia Pacific) I would like to order: Product title Product code Price / / $ / * * Please refer to our website for up-to-date prices Complete your details: Name Job Title Department Company Address State/Province Post Code/ZIP Country Tel Fax Sign below to confirm your order: Complete payment details: Please indicate your preferred currency option: UK Euro US$ Yen I enclose a check payable to Datamonitor Ltd for (+ p+p $30 UK / $60 rest of world) Please invoice my company for (+ p+p $30 UK / $60 rest of world) Please debit my credit/charge card Amex Visa Diners Mastercard Card No Expiry Date / Cardholder Signature Cardholder address Please supply purchase order number here if required by your accounts department: EU companies (except UK) must supply: VAT / BTW / MOMS / MWST / IVA / FPA number: Datamonitor products and services are supplied under Datamonitor s standard terms and conditions, copies of which are available on request. Payment must be received within 28 days of receipt of invoice. I do not want to receive future mailings from Datamonitor and its related companies. Occasionally, our client list is made available to other companies for carefully selected mailings. Please check here if you do not wish to receive such mailings. Datamonitor Ltd. Registered in England. Registered No Registered Office: Finchley Road, London NW3 5JJ DMFS2248WEB From Europe: tel: fax: fsinfo@datamonitor.com From the US: tel: fax: usinfo@datamonitor.com From Asia Pacific: tel: fax: apinfo@datamonitor.com Contact us to find out more about our products and services