As we hurtle into yet another new financial year business banking
markets are braced for a fresh wave of turbulent change on several
fronts. Customer experience is positioned firmly at the forefront of
new product development and service calibration.
First and foremost however, the most pressing challenge for Australian
banks is keeping up with customer expectations. This is highlighted by
Australia’s biggest business lender, National Australia Bank’s (NAB)
divisional restructure expressly driven by “customer focus”.
Key headwinds set to buffet the banking sector in FY17 include:
Regulatory change, capital adequacy requirements
Digital disruption, winning the ‘fintech race’
Low interest rates, flat or falling revenue growth
Expense control, rising cost-to-income ratios, narrowing Net
Steadily rising bad and doubtful debts, impairments
- Skills shortage and rising competition for talent, both within
financial markets and externally
The relative success Australian banks are achieving in overcoming
industry challenges and keeping pace with rising customer expectations
varies significantly. The voice of the customer has never been more
important in assessing client pain points, service gaps and
Comparing and grading the banks’ relative
performances using E&P’s demand side analysis, based on thousands of
direct interviews with CFOs and corporate treasurers Australia-wide,
reveals a mid-year business banking report card with surprising
Businesses are increasingly turning to their bank in a transaction
banking (TB) capacity as opposed to sourcing credit, refinancing or
new lending facilities according to E&P research. NAB and Commonwealth
Bank of Australia (CBA) have traditionally outperformed in terms of
transactional market share and wallet share outcomes.
The two groups
cumulatively secure one in two core cash management, payment
processing and internet banking relationships. Despite rising customer
churn intentions, average wallet share remains relatively high,
particularly among small businesses who continue to bank in a holistic
way across disparate product lines.
The key TB battleground however is the mid-market. Within this segment
the incumbent Big Four are facing concerted competition from HSBC. The
global bank is shifting from a ‘foot in the door’ approach of
converting secondary relationships into primary relationships towards
a more defined cross sell proposition, headlined by the group’s
standout cross border payments and international TB customer
Asset and equipment finance volumes are forecasted to flat line in the
coming year, however businesses’ use of the facility as proportion of
total borrowings continues to trend higher, increasing 6.1 percent
Reflecting the high level of cross sell activity in
equipment finance markets into underling transaction banking
relationships, CBA and NAB top the mid-year score card, however
significant variance is exhibited by segment, state and sector
Australian businesses cited the need for online functionality and
improved digital processes within their trade finance products,
indicating that market share growth is heavily dependent upon those
According to E&P’s Trade Finance research, based on
interviews with over 1,800 importers and exporters twice a year,
international banks outperform their domestic majors by a considerable
margin for international eTrade solutions, in particular Citigroup and
HSBC. The results also emphasise the importance of developing further
“mind share”, gauged from research respondents nominating which trade
finance brand springs to mind first.
The chase for lower fees and execution costs continues to entice
businesses into adopting a ‘multibanking’ approach for Spot FX.
Despite a fragmented market, and falling wallet share, non-bank
providers have largely been unable to capitlise on recent market share
gains, in particular OFX, American Express and Western Union.
However, falling wallet share trends are not as prevalent in more
sophisticated hedging products such as FX Options and Forward FX.
Customers’ individual dealer relationships, online experiences and the
bank’s respective digital prowess are driving exceptional wallet share
outcomes for three of Australia’s Big Four providers for these
Customer satisfaction continues to become disconnected from customer
engagement and buying behaviour, no longer representing actionable
predictive power for future changes in output measures such as market
share, wallet share and cross sell performance.
Advocacy is now deemed as the most valuable view of likely customer
engagement. Alarmingly for two prominent providers in ANZ and Westpac,
business owners, CFOs and treasurers are not prepared to recommend
their services to colleagues or associates. Both banks have
experienced considerable declines (around 71 percent and 66 percent
respectively) over the last decade, well beyond the market-wide
average of 55 percent.
Despite business advocacy of financial products plummeting to new lows
in E&P’s Business Banking Index, a limited number of providers,
including NAB, HSBC, and St George are bucking the trend, while BOQ
leads by example; achieving outstanding customer sentiment scores.
In many instances client expectations are shaped by positive personal
banking experiences, retail innovations and behavioural shifts
underway in other industries. Further research from E&P’s Business
Banking Index indicated one in two institutional enterprises felt
their business banking experience exceeded their experience as a
personal banking customer. This figure fell dramatically to only 14.5
percent for SMEs and 9.7 percent for Micro businesses.
Institutional bank clients’ satisfaction can be attributed to their
VIP treatment, whereby they are granted early or first access to
advanced prototype technology and innovative processes. Blockchain
technology currently in development is an excellent example – the Top
500 Australian enterprises by revenue will be exposed to the newest
releases up to five or ten years before small businesses.
Importantly though, small businesses are now frequently offered
‘institutional standard’ products and services by non-bank
competitors. They are doing so via cloud technology and other
‘digitally enhanced’ processes aimed at improving efficiency and
New strategic initiatives designed to overcome key challenges are
proceeding ‘out of kilter’ with client needs advancing at a much
faster rate. What was previously “nice to have” functionality is
rapidly becoming “need to have”. It is within these margins fintechs
and disrupters are successfully targeting a firmer foothold and moving
beyond established ‘happy hunting grounds’ of payments, foreign
exchange (FX), online lending and data analytics.