Trends in High Interest Savings Accounts in Australia

Published by: Datamonitor

Published: May. 29, 2008 - 6 Pages

Table of Contents

Overview

Catalyst

Summary

Executive Summary

Market context

There are many competing products in the high interest deposit area

Technology changed the playing field for savings accounts

Global financial conditions have sparked intensified interest in deposits

Customer focus

Most accountholders choose their provider based on rates

Accountholders who arrange savings online are younger, better educated and have a higher income

BankWest has the most satisfied customers of the major providers

Competitive dynamics

Margins are relatively low for deposit products

Foreign banks and regional banks have grown their share of household deposits

CBA is the market leader for high interest savings deposits

Future focus

Savings products will continue evolving

In time savings accounts and transaction accounts will merge into a single product

Table of Contents

Table of figures

Table of tables

Market Context

Savings accounts have benefited from the increased availability of banking

Banking accessibility has increased strongly since the 1980s

Bank branch numbers declined during the 1990s but have recently increased slightly

Technology changed the playing field for savings accounts

Total Australian bank deposits have grown strongly

There are many competing products in the high interest deposit area

Global financial conditions have sparked intensified interest in deposits

Customer Focus

A broad range of Australians have high interest savings accounts

Most Australian consumers now hold at least one high interest savings account

Close to half of Australian savings accountholders have $5,000 or more in their main account

Half of all savings accountholders make weekly or monthly deposits

More than half of savings accountholders have no specific purpose for saving

Interest rate drives provider choice when choosing a high interest savings account

Most accountholders choose their provider based on rates

Bank advisors and the internet are the most common sources of information

Fees and rates are the most important considerations when switching account

Online high interest savings accountholders have distinctive characteristics

Online arranging savings accountholders are younger, better educated and have a higher income

Accountholders who arrange their savings online are more financially savvy

Savings accountholders with online only access are more active customers

Satisfaction with high interest savings account providers varies

BankWest has the most satisfied customers of the major providers

Satisfaction metrics are especially important for high interest savings account providers

Competitive Dynamics

Providers mainly compete on the basis of rate and accessibility of funds

Interest rates have many variations in the market

Interest rates vary wildly between deposit products

Some products have fixed or split interest rates

Introductory rates are used as a tool for customer acquisition

Many products offer higher interest rates if certain conditions have been fulfilled

Accessibility of funds differs between products

Competition has led to low margins in the Australian market

Margins are relatively low for deposit products

Online accounts have revolutionized the market for deposits

New entrants have challenged the big Australian banks

The five largest Australian banks hold 78% of household deposits

Foreign and regional banks have grown their share of household deposits

CBA is the market leader for high interest savings deposits

Future Focus

Savings products will continue evolving

Interest rates offered are set to stay high and margins low

Product terms will continue to become more relaxed

Online accounts will become more prevalent

Product bundling has important implications for product development

In time the savings account and the transaction account will merge into one product

There are signs that savings accounts and transaction accounts will merge into a single product

The convergence of account types will have profound effects on the Australian deposit market

Government initiatives will drive new product innovation

The Australian government has committed to making financial product switching easier

The recently proposed First Home Saver Account scheme will create a new product category

APPENDIX

Supplementary data

Definitions

CAGR

Cash rate target

Foreign subsidiary banks

Methodology

Further reading

Ask the analyst

Datamonitor consulting

Disclaimer

List of Tables

Table 1: Highest interest rate available from institutions varies

Table 2: Banking access points in Australia, 1990-2007

Table 3: Number of bank branches in Australia, 1990-2007

Table 4: Total deposits of foreign subsidiary banks, 2004-2007

Table 5: Total bank deposits in Australia, 1990-2008

Table 6: Average bank CMA interest rates, 2006-2008

Table 7: How many high interest savings accounts do you have?

Table 8: How much money do you currently have in your main high interest savings account?

Table 9: How often do you deposit money in your main high interest savings account?

Table 10: Do you have a specific purpose/purposes for your high interest savings account?

Table 11: Why did you choose this provider of high interest savings account?

Table 12: What sources of information did you use when choosing your main high interest saving account?

Table 13: If you were going to change your high interest savings account, which of the following would be important considerations?

Table 14: Demographics of high interest savings account customers

Table 15: Financial attitudes of high interest savings account customers

Table 16: Account behaviour of high interest savings account customers

Table 17: Attitudes of high interest savings account customers

Table 18: Satisfaction with high interest savings account provider

Table 19: Average interest rates of the largest providers for different products, March 2008

Table 20: Average margins of the largest providers for different products, 2000-2008 (Table 1 of 3)

Table 21: Average margins of the largest providers for different products, 2000-2008 (Table 2 of 3)

Table 22: Average margins of the largest providers for different products, 2000-2008 (Table 3 of 3)

Table 23: Total bank household deposits, February 2008

Table 24: Growth rate in household deposits for different institutions, 2002-2007

Table 25: Competitor market share of high interest savings deposits

List of Figures

Figure 1: The number of Australian ATM and EFTPOS terminals has grown strongly, 1990-2007

Figure 2: The number of bank branches declined during the 1990s, 1990-2007

Figure 3: Total deposits on the books of foreign subsidiary banks have grown, 2004-07

Figure 4: Total bank deposits in Australia have grown strongly, 1990-2007

Figure 5: Deposit products vary with regard to funds required and availability

Figure 6: Average interest rates on bank CMAs have risen, 2006-2007

Figure 7: Most Australian consumers have at least one high interest savings account

Figure 8: 56% of accountholders have less than $5,000 in their main savings account

Figure 9: Half of savings accountholders make weekly or monthly deposits

Figure 10: Around a quarter of all savings accountholders save for an eventual emergency

Figure 11: Rates drive choice of high interest savings account provider

Figure 12: Bank advisors and the internet are commonly used sources of information

Figure 13: Fees and rates are the most important considerations if switching account

Figure 14: Online arranging mortgagors have a distinct demographic profile

Figure 15: Online arranging savings accountholders are more financially savvy

Figure 16: Online only savings accountholders are more active customers

Figure 17: Online only savings accountholders differ in their attitudes

Figure 18: BankWest has the highest proportion of very satisfied customers

Figure 19: Interest rates vary between different high interest savings account products, March 2008

Figure 20: Margins have varied for different deposit products, 2000-2008

Figure 21: CBA has almost $100 billion in household deposits, February 2008

Figure 22: Bank of Queensland has grown its household deposit base quickly since 2002

Figure 23: CBA has the largest market share of high interest savings deposits

Abstract

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