Australia’s growing cohort of neobanks still face a persistent challenge around awareness and trust, despite millions of consumers being unhappy with major financial institutions, according to new research from Nielsen.
But Nielsen’s data, based survey of consumers over the last three financial years, suggests one in two consumers are open to the idea of replacing their main financial institute with one of the new digital-only banks.
And the amount of customers looking to change their main financial institution in the next six months is now 12 per cent or 2.5 million Australians, 9 per cent higher than a year ago.
The Nielsen surveys found half of Australian consumers say they have never heard of a neobank and even when the new competition has been explained to consumers, only a third said they are likely to use a neobank as one of their financial services. A quarter, once aware of neobanks, said they are likely to have one as their main financial institution.
It’s worth noting most of Australia’s neobanks have only fully launched this year, including several after the Nielsen surveys were conducted.
When Open Banking, Australia’s new consumer data portability scheme, begins in February next year, competition regulators hope barriers to switching will be further reduced, presenting and opportunity for both challengers and incumbents.
Opening up switching
Deloitte research conducted last month suggests the key to encouraging switching in an Open Banking world will be moving beyond compliance with the scheme to offer new value propositions.
Deloitte’s research suggests trust, privacy and security, customer engagement, customer knowledge, and value are the “big five” factors today for Australian banks.
- Read more: Cover Story: Australia’s Neobanks Have Cleared Key Regulatory Hurdles, But Will Customers Embrace Them?
“To attract a customer, having a point of difference is critical,” said Robin Scarborough, Deloitte customer partner.
“All banks, incumbents and challengers, and also potential non-bank competitors, need to see open banking as an opportunity. This requires focusing on developing propositions that solve customers’ problems in a way that delivers value to that customer.”
Like Nielsen, Deloitte’s research found Australian consumers’ lack of financial and data literacy will be a key challenge to realising the switching benefits of Open Banking.
Nielsen says its data shows “Australians aren’t quite ready just yet to transition from traditional banking behaviours to a neobank’s new mobile-only experience” and the new entrants should be focused on building their brands.
So far the best unprompted brand awareness goes to Volt Bank (27 per cent), Xinja (26 per cent) and Q Pay (24 per cent). But overall, 49 per cent of Australians say they have never heard of a neobank.
“Neobanks are still relatively new to Australia,” writes Nielsen financial services lead Jo Brockhurst.
“Given the fluctuating conditions in the financial services sector over the past two years, the Australian market is ripe for neobanks’ success. While this all sounds like a dark cloud cast over traditional banking, we have yet to see how many people will actually put their money where their mouth is and switch their main financial institution to a neobank.”