New research suggests that there is a threshold at which customers can accept interest rates and fees before losing faith in their financial services.
Considering moving their accounts, loans, or transactions to more economical online services, 74 per cent of Australians believe they have lost at least some trust in banks as a result of high-interest rates and fees.
According to the survey by Money Transfer Comparison, 28 per cent of respondents and 42 per cent of respondents, respectively, have lost faith in traditional banks as the best platform for all of their financial endeavours.
A slightly higher percentage (75 per cent) of respondents are willing to switch their financial activities to these non-traditional companies when they feel that their banks are charging too much. Even before the RBA started raising interest rates in May 2022, banks were increasing fixed-rate loans in anticipation of further cash rate increases.
While the RBA’s current cash rate is 2.85 per cent, certain loans have interest rates that are 4-5 percentage points higher. Banks generally charge higher conversion rates than specialised online money transfer services and can charge up to $40 in wire fees for overseas money transfers.
Money Transfer Comparison discovered that a disproportionately higher percentage of people in NSW and Victorian had lost faith in the big banks because of their excessive fees, despite the fact that these states are likely paying down the highest mortgages in Australia.
Equal percentages of respondents from each State (72 per cent) had lost faith, with Queenslanders and West Australians (71 per cent) and South Australians (60 per cent) following closely behind. Younger generations are more likely to have at least partially lost faith in conventional banking: 74 per cent of respondents aged 18 to 54 compared to 58 per cent of respondents aged 65 and older
Alon Rajic, Founder and Managing Director of Money Transfer Comparison, says: “Our research 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.
When comparing replies by age, the age group of 35 to 54 years old has the highest percentage of respondents who are inclined to search for less expensive financial services elsewhere (80 per cent). 73 per cent of respondents who were between the ages of 18 and 34 and just 67 per cent of those who were over 55 agreed.
“It is also fairly simple to switch to a new provider with the help of online comparison services – and I am encouraged to learn that three in four Australians are willing to make the switch to low-cost and innovative financial platforms if they can get a better deal. A significant consumer shift from traditional banks to innovative fintechs may also drive banks to increase their competitiveness.”
See full results by Money Transfer Comparison here.
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