Retail Deposits in Australia

Content

• Overview
• Catalyst
• Summary
• Executive Summary
• Market context
  • Deposits have grown strongly in Australia over the last decade
  • Product innovation has encouraged deposit growth
  • Supplying retail deposit products has several important advantages for banking providers
• Consumer focus
  • The global financial crisis has eroded consumer confidence
  • Consumers seek the safe haven of institutions that are considered safe
  • Many consumers are planning to take up a savings account in the next 12 months
  • Consumer satisfaction with deposit products is relatively high but has recently fallen
  • There is a complex and changing relationship between transaction accounts and savings accounts
• Product focus
  • Deposit products vary in terms of rates and conditions
  • Rates on deposit products are in a state of flux
  • Average rates have recently fallen and converged
• Competitor focus
  • The major banks have grown their household deposit base
  • There are different strategies when it comes to retail deposits
• Future focus
  • The internet will become yet more important for deposit products
  • Product convergence will create new deposit products
  • Competition will push rates higher and fees lower
• Deposits 2.0
  • Table of figures
  • Table of tables
• Market Context
  • Deposits have grown strongly in Australia over the last decade
  • Total Australian bank deposits have almost quadrupled in the last 10 years
  • Product innovation has encouraged deposit growth
  • The global financial crisis has made deposits more attractive for banks and consumers alike
  • Household deposits have become more important in recent years
  • Household deposits have shown especially strong growth over the last two years
  • Household deposits' proportion of total deposits has grown in the last 18 months
  • Supplying retail deposit products has several important advantages for banking providers
  • Deposit products tie a consumer to the bank
  • Deposit products offer opportunities for cross-selling
  • Deposit products generate significant fee income for banks
• Consumer Focus
  • Consumer attitudes toward deposits and banks have shifted
  • The global financial crisis has eroded consumer confidence
  • Consumers seek the safe haven of institutions that are considered safe
  • Many consumers intend to take up deposit products
  • A quarter of consumers without savings accounts are planning on taking up the product within 12 months
  • Action does not always follow intention when it comes to saving
  • Consumer satisfaction with deposit products is relatively high but has recently fallen
  • Savings accounts command a higher degree of satisfaction than transaction accounts
  • Satisfaction with providers has fallen for both transaction and saving accounts
  • Internet banking is highly regarded by consumers
  • Reasons for choosing account providers are changing
  • There is a complex relationship between transaction accounts and savings accounts
  • Savings account providers are often chosen based on rates
  • Online only savings account holders have distinct attitudes
  • Online-only savings account holders hold more money in their account
  • A significant proportion of consumers would like to arrange accounts via the internet
• Product Focus
  • There are a number of competing products in the retail deposit market
  • Deposit products vary in terms of rates and conditions
  • The first home saver account is a new product type
  • Rates on deposit products are in a state of flux
  • Rates vary between different deposit products
  • Interest rates vary strongly
  • Average rates have recently fallen and converged
  • Term deposit rates and online savings account rates have converged
  • Bank margins on deposits have fallen
• Competitor Focus
  • The major banks compete for household deposits
  • The major banks have grown their household deposit base
  • The 10 largest banks account for 96% of total bank deposits
  • The Commonwealth Bank has the highest market share of bank household deposits
  • The major banks differ in their focus on retail deposits
  • There are different strategies when it comes to retail deposits
  • Strategies vary in terms of cost and time horizon
  • The major banks face challenges which smaller players do not
• Future Focus
  • Product innovation and evolution will continue
  • The internet will become yet more important for deposit products
  • Product convergence will create new deposit products
  • The convergence of account types will have a profound effect on the Australian deposit market
  • The eventual economic recovery will change the playing field in the deposit market
  • New entrants will return to the market
  • Competition will push rates higher and fees lower
  • Deposits 2.0
• APPENDIX
  • Data tables
  • Methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
  • Table 1: Household deposit growth rates
  • Table 2: Deposit product types vary in terms of features
  • Table 3: Household deposit growth rates
  • Table 4: Household deposits and retail mortgages in April 2009
  • Table 5: Almost half of consumers would rather use the internet for managing finances, April 2004
  • Table 6: Total bank deposits, March 1999-Mar 2009
  • Table 7: Household bank deposits, April 2004-April 2009
  • Table 8: Proportion of total deposits that are household deposits, April 2004-April 2009
  • Table 9: Reasons for choosing provider of financial products, April 2009
  • Table 10: Bank fees derived from households, 1997-2008
  • Table 11: General economic confidence of Australian consumers, April 2009
  • Table 12: Personal economic confidence of Australian consumers, April 2009
  • Table 13: Attitudes towards financial services, April 2009
  • Table 14: Savings account holdings and intentions, April 2009
  • Table 15: Financial product intentions, April 2009
  • Table 16: Account satisfaction, April 2009
  • Table 17: Satisfaction with transaction account features, April 2009
  • Table 18: Reasons for choosing transaction account provider, April 2009
  • Table 19: How long different groups have held their transaction account, April 2009
  • Table 20: Reasons for choosing savings account provider, April 2009
  • Table 21: Reasons for choosing savings account split by account type, April 2009
  • Table 22: Attitudes toward savings account by account type, April 2009
  • Table 23: Attitudes toward savings account, April 2009
  • Table 24: Amount held in savings account by account type, April 2009
  • Table 25: Considerations if getting new savings account, April 2009
  • Table 26: Account arrangement and preferences, April 2009
  • Table 27: Average bank interest rates for different products, April 2004-April 2009
  • Table 28: Cash rate target, January 1993-June 2009
  • Table 29: Rate difference between online savings accounts and one-year term deposits, April 2004-April 2009
  • Table 30: Margin of three month bank accepted bill rate over different deposit products, April 2006-April 2009
  • Table 31: Household deposits by bank, April 2004-April 2009
  • Table 32: Household deposits on the books of banks, April 2009
  • Table 33: Market share of bank household deposits, April 2009
  • Table 34: Household deposits and non-household deposits by bank, April 2009
  • Table 35: Proportion of banks' total deposits that are household deposits, April 2009
  • Table 36: Reasons for avoiding the internet channel for arranging financial products, April 2009
  • Table 37: Ratio of bank interest expenses to bank deposits, June 2004-December 2008
• List of Figures
  • Figure 1: Interest rates for different product types have converged, April 2004-April 2009
  • Figure 2: Total bank deposits have grown strongly in Australia over the last decade, March 1999-March 2009
  • Figure 3: Household deposits have shown strong growth over the last two years, April 2004-April 2009
  • Figure 4: The proportion of deposits that are household deposits has increased since 2007, April 2004-April 2009
  • Figure 5: In the last 18 months household deposits have become more important for banks, November 2007-April 2009
  • Figure 6: Transaction accounts frequently influences the choice of provider for other products, April 2009
  • Figure 7: Transaction accounts generate significant fee income for banks, 1997-2008
  • Figure 8: Most Australians feel that the economy will deteriorate over the next 12 months, April 2009
  • Figure 9: A significant proportion of consumers are concerned about their ability to pay their bills, April 2009
  • Figure 10: Consumers gravitate toward established domestic financial institutions, Apr 2009
  • Figure 11: A quarter of those without a savings account plans on taking one up within 12 months, April 2009
  • Figure 12: Many of those without a savings account plan on taking one up within 12 months, April 2009
  • Figure 13: Savings account customers are generally satisfied with their provider, April 2009
  • Figure 14: Satisfaction with transaction account provider has fallen, April 2009
  • Figure 15: Satisfaction with savings account provider has fallen, April 2009
  • Figure 16: Internet banking is the most highly regarded aspect of transaction accounts, April 2009
  • Figure 17: Savings accounts can drive choice of transaction accounts, April 2009
  • Figure 18: Choosing transaction account based on where savings are held has become less common, April 2009
  • Figure 19: Rates drive choice of savings account provider, April 2009
  • Figure 20: Online savings account holders are more rate-sensitive, April 2009
  • Figure 21: Online savings account holders are more active and rate-sensitive customers, April 2009
  • Figure 22: The rate is the most important consideration if getting new savings account, Apr09
  • Figure 23: Online account holders hold more money in their account, April 2009
  • Figure 24: A significant proportion of consumers would like to arrange deposit products online, April 2009
  • Figure 25: Online savings accounts have the highest interest rates, April 2009
  • Figure 26: The cash rate target has dropped sharply, June 1999- April 2009
  • Figure 27: Interest rates for different product types have converged, April 2004-April 2009
  • Figure 28: One-month term deposit rates are now closer to rates on online savings accounts, April 2004-April 2009
  • Figure 29: Margins of deposit rates over short-term money market rates have fallen, April 2006-April 2009
  • Figure 30: Bank household deposits have grown strongly, April 2004-April 2009
  • Figure 31: CBA has the highest amount of household deposits, April 2009
  • Figure 32: The two major banks control more than half of all bank household deposits, April 2009
  • Figure 33: Westpac has higher non-household deposits, April 2009
  • Figure 34: CBA derives the highest proportion of total deposits from household deposits, April 2009
  • Figure 35: Lack of interactivity is a common reason for avoiding the internet channel, April 2009
  • Figure 36: The proportional interest rate cost for deposits has increased, March 2005-December 2008
  • Figure 37: A unified online platform provides advantages to provider and consumers alike