Aussie customers increasingly losing trust in their banking service providers

Alon Rajic, Managing Director at Money Transfer Comparison

Research suggests that consumers have a limit to the level of interest rates, fees and charges they can take before they lose trust in their bankers. Three quarters (71%) of Aussies say they have lost some trust in banks based on high interest rates, and 74% would consider switching their accounts, loans or transactions to more affordable online services. 

Money Transfer Comparison, a comparison website that enables Aussies and businesses to source the best money transfer rates, commissioned a survey of a panel of 1009 Aussies to gauge whether high loan interest rates and fees have caused Aussies to lose trust in banks.

Why are Aussies losing trust in their bankers?

The survey found that 42% have lost trust in some bank services and 28% have lost trust in traditional banks as the best platform for all of their financial undertakings. A slightly higher proportion (75%) of respondents are willing to switch their financial undertakings to these non-traditional services, when they believe their banks are charging too much. 

Even before the RBA began raising interest rates in May 2022, banks were increasing fixed-rate loans in anticipation of ongoing cash rate increases. Some loan interest rates are sitting 4-5% higher than the RBA cash rate of 2.85%. Banks also charge wire fees of up to $40 for international transfers and often higher exchange rates than online transfer platforms.

Missed payments on bank loans and credit cards, and overdrawn accounts, incur fees of up to $15. Specialist, alternative online financial services – like money transfer platforms – can often be much more cost-effective options. When comparing the results across the States, the study found that a relatively higher proportion of NSW and Victorian residents – who are likely paying off the largest mortgages in Australia – have lost trust in the big banks.

72% in each State have lost trust, followed by 71% of Queenslanders and West Australians and just 60% of South Australians. Younger groups are more likely to have lost some trust in traditional banking: 74% of 18-54-year-olds, compared with 58% of over-65s respondents.

How do Aussies feel about online financial services?

Money Transfer Comparison sought to discover whether Australians would look to switch to cheaper, online financial services when they really feel their bank interest rates, fees and charges are too high. Just one quarter (25% of the respondents) said they prefer to use services by traditional banks regardless of the level of interest rates, fees and charges.

When Money Transfer Comparison analysed the responses, it found Queenslanders are the savviest bargain hunters, with 82% willing to be more diligent in comparing financial services provider fees and to switch to more cost-effective online services if they were being charged too much. Victorians seem to be most trusting of banks, with just 68% saying they would compare providers and switch if they felt they were being charged too much by their banks.

When comparing age-based responses, the highest proportion of respondents likely to look for cheaper financial services elsewhere are in the 35-54-year age bracket (80%). This was followed by 73% of 18-34-year-olds and only 67% of over-55 respondents.

What do the findings mean for bankers?

Alon Rajic, Founder and Managing Director of Money Transfer Comparison, commented: “Our research data shows that the majority of customers are not blindly loyal to their banks – and will move elsewhere if rates and fees increase disproportionately. With so much information available online, and so much competition in the market, it is very easy for consumers to compare interest rates and fees across dozens of financial service providers.”

“It is also simple to switch to a new provider with the help of online comparison services – and I am encouraged to learn that three in four Aussies are willing to make the switch to low-cost financial platforms if they can get a better deal. A big consumer shift from traditional banks to innovative fintechs may also drive banks to increase their competitiveness.”

Please see the full survey data here.