Better Bank Marketing: A win for the little guy

The Federal Government’s move to guarantee all Australian bank deposits has been generally welcomed by the industry, with many commentators arguing it was needed to avoid a run on an Australian bank.

The guarantee is certainly good news for Australia’s second tier and mutual financial institutions which had been subjected to increased questioning from customers on their credit ratings and overall stability.

Despite credit unions and building societies falling under the same regulatory regime as their larger bank competitors, many consumers were under the false impression these institutions were less secure and that deposits with the major banks were explicitly protected.

The guarantee puts all ADIs on a level playing field and there’s even the chance it could save Suncorp from being eaten up by one of the big four, which would ultimately be a win for competition and consumers.

Credit unions have been telling Online Banking Review for some time that they are being questioned by customers seeking to know their credit rating, usually as a result of bank branch staff hoping to deter them from moving their funds to a competitor.

Credit ratings were not even on the radar of consumers shopping around for savings products until the credit crunch emerged and direct bank RaboPlus started marketing itself as “Australia’s safest bank”.

Until recently the Australian Bankers’ Association had always opposed deposit insurance, arguing it was costly and problematic, most likely because of the moral hazard issues it presents. Ultimately it means all financial institutions will come under increased scrutiny with regulators looking more closely into their investment practices.

So it will be interesting to see if any of the big 4 banks start using the guarantee as a marketing tool.

Following feedback from customers, RaboPlus moved quickly to add information about the guarantee to its site – nothing like a big red “guaranteed’ stamp to instill confidence.

High interest savings, term deposits, managed funds, online investments from RaboPlus via kwout

The Commonwealth Bank continues to heavily promote its “Determined to be strong in volatile times” brand messaging, but a quick glance of all the major bank’s websites shows no obvious references to the Government guarantee.

NAB’s new direct banking arm UBank has not added any reference to the guarantee, referring instead to the strength and “global capability” of its parent.

UBank - A good place for money - Backed by NAB. A direct bank with term deposit via kwout

mecu, one of the only Australian credit unions to have a credit rating, has added a fact sheet to it’s site (in their haste they spelt Government incorrectly), something likely to be replicated by more institutions in coming days.