I often attended briefings by market research firms that provides analysis and customer insight on the institutional corporate and business banking markets across the Asia Pacific.
Most briefings were quarterly updates on the Australian corporate businesses which were drawn from interviews with more than 1000 companies and direct interviews. They were often well attended by senior bankers and stakeholders in the financial industry.
While the briefing and the findings were meant for bankers, so that they could understand their markets better, they actually had given me even more intriguing and revealing stories about our corporate Australia.
There is a contrasting behaviour of deposit funding and debt index (DFDI) among the different business segments. The smaller end of our business/corporate segments are continually deleveraging, depositing more $ than borrowed, while the institutional segment is opposite, borrowing more $ than deposited. This implies four disturbing trends of our economy:
The SME and Micro Business segments, comprising 95% of all business in Australia, are still very concerned with near-term growth opportunities and hence, less inclined to gear up for growth.
The lower borrowing level is also an indication of the banks’ increasing reluctance to extend credits towards these business segments which are considered higher risk, and thus, lower return banking clients.
Our SME and micro businesses still have not learned the science and art of positioning their credit story and hence do not know how to convince their banks to lend to them.
If this continues, 95% of our business segments will not get sufficient capital for growth. Our economic recovery is jeopardised.
The Business Banking Index of customers’ advocacy (defined as client engagement with banks) continues to fall. Only a small few out of the eleven banks recorded a higher than average score. NAB was the only one out of the four majors scoring higher than average. Perhaps the previous “breaking-up” strategy was for real. The unassuming Bank of Queensland scored the highest, which might imply that their franchising model did encourage better services to clients. One puzzling finding was that CBA (excluding BankWest), the largest and the most profitable Australian bank, scored the lowest satisfaction score. One would have thought that banking with CBA infered satisfaction with CBA. Not so! Combining this with the finding of an increased churn levels (defined by number of customers planning to switch in coming month), this meant that CBA may soon experience high client turnover levels if they didn't improve current customer service.
Banks seem deaf to customer demands. Three other distinctive, yet interrelated findings on business segment demands for banking all pointed to one crucial issue: banks are not listening.
The market is screaming for banks focused on customer retention, not acquisition;
The market demands banking services, not banking products
The market is unwilling to engage banks, reflecting distrust.
These findings further exhibit the continued and growing disconnect between banks and their client markets.
Sadly, I don’t believe that banks will change their strategy to fit our business segments’ wants anytime soon. This is the new era of relationship banking in which banks' behaviours are driven by a different set of external influences to the good old days. We all need to be very cognisant of this.
Rather than airing our dissatisfaction through these market researches, we ought to take pro-active measures to safeguard our own destiny. The earlier we understand how banks work, the earlier we can develop new strategies in working with banks, the earlier we can embark on a growth trajectory.