Switching bank accounts and updating payment details is an inconvenience the consumer watchdog wants streamlined to stoke competition in the retail deposit market.
The Australian Competition and Consumer Commission (ACCC) said savers could be earning more money if it weren’t for barriers preventing bank customers from searching for a better deal.
Treasurer Jim Chalmers asked the ACCC to look into the behaviour of banks earlier this year following concerns interest rate increases across deposit products were ad hoc and conditional.
The consumer watchdog found evidence of banks employing pricing strategies that took advantage of “consumer inertia and other biases to reduce the overall cost of their deposit funding.”
“This includes segmenting their customers through product design and conditional rates, leading to significant differences in rates between products, even within the same bank,” the ACCC said in a report.
The ACCC made seven suggestions to help people get more out of their savings, including revisiting account portability to make it easier to move between banks.
Switching banks often comes with the hassle of updating account details with an array of individuals and businesses.
Eliminating these pain points would “sharpen the competitive focus” in the deposit market, and the ACCC says improved portability is worth considering given the last time it was investigated in 2011, banking technology was much less advanced.
The regulator also wants banks to do more to notify customers about product changes, and has called for more transparency around bonus accounts.
These deposit products are common in Australian banking and ask customers to meet certain conditions, such as a minimum deposit hurdle each month, to attract a higher interest rate.
The ACCC found 71 percent of these accounts did not qualify for the bonus interest rate on average each month based on analysis over the first six months of the year.
Consumers could be missing out on hundreds of dollars in interest by failing to meet the bonus conditions.
ACCC chair Gina Cass-Gottlieb said customers were enticed by high headline interest rates but then struggled to keep track of the conditions attached.
“We are also recommending that banks alert their customers if they are about to lose entitlements to their bonus interest, for example by withdrawing too much or too often in a given month,” Ms. Cass-Gottlieb said.
Comparison sites should also be more transparent about their commercial relationships with banks, in the ACCC’s view.
The federal government will release a formal response to the report next year.
“We expect banks to treat their customers fairly when it comes to their savings accounts,” Dr. Chalmers said on Dec. 15.
Dr. Chalmers said increased interest on savings should be the “silver lining” of the tightening cycle that was putting pressure on mortgage holders.
The Australian Banking Association welcomed the regulator’s findings.
“With more than 900 transaction and savings deposit products available to Australian consumers, banks understand that at times some consumers may struggle to decide what products are best for them,” ABA chief executive Anna Bligh said.
Ms. Bligh said banks were focused on making improvements to their products and would consider each of the recommendations in the report.
