The Great Bank Wars of 2012 made for enthralling marketing viewing and, after the National Bank shuffled off, its competitors smelled blood. Now Roy Morgan has provided some figures on just how many Kiwis shifted banks in the past year and where National Bank customers went.
The research shows that the flurry of advertising by the major banks following the announcement has driven up switching rates among New Zealand consumers and the proportion of Kiwis who switched their Main Financial Institution (MFI) in the previous 12 months is now approaching double the six percent low in April last year. This increase equates to over 100,000 more people switching in 2012 than did in 2011, something that could also be partially attributable to changes to the rules that made switching easier.
The research shows that of those customers who have switched from National Bank in the past year, around 60 percent went to ANZ, although the latest data includes switchers from within the year prior to the announcement, so Roy Morgan's general manager Pip Elliot says "it can't exactly be narrowed down" to that moment.
Bringing the two banks together was a massive task and ANZ seemed to do a pretty good job of trying to retain National Bank’s traditionally high-worth, multi-product customers by promoting the ‘the new ANZ’ as a fusion of the best of both. But the decision certainly gave the other banks a sniff (Kiwibank promoted stress-free switch assistance while Westpac directly targeted National Bank customers who were unhappy being shoehorned into ANZ).
Roy Morgan's John Hackett says it's important to point out that the figures don't show National Bank losing 40 percent of its entire customer base. Instead, 40 percent of all those surveyed who switched from National Bank last year went elsewhere. Given it could be argued National Bank doesn't exist anymore and most, if not all, customers have already been switched over to ANZ, he admits it's a grey area, but the research is based on what respondents regard as their MFI, so if someone still has a National Bank card in their wallet or a black horse on the window of the local branch, he says some customers might still classify National Bank as their MFI.
"In such a competitive market, the major banks have for some time been battling to poach customers from each other by promoting the ease and potential benefits of switching," says Pip Elliott, general manager, Roy Morgan Research NZ. "Many customers, however, will only switch their MFI when it comes to ‘moments of truth’, such as the renewal of their mortgage or taking out a new loan. 2012 saw a dramatic increase in switching activity, due in large part to ramped up campaigning from all major banks following ANZ’s dissolution of the National Bank brand. Early indications suggest Westpac’s ‘Is your bank making you blue?’ and Kiwibank’s ‘How to change banks’ commercials have yet to really challenge ANZ’s in-house advantage in retaining the National Bank customers."
- Check out all the banks' wooing attempts here.
From National Bank to…
Interestingly, Kiwibank and Westpac, which were among the most explicit in their overtures, each chalked up around six percent of switching National Bank customers, while the fairly restrained ASB took nine percent and BNZ got four percent. TSB was also quick to pounce, but it doesn't feature on the list of the banks that made up the other 15-ish percent of National Bank switchers.
ANZ was contacted for comment about the numbers and a spokesperson said: "The research shows that the overwhelming majority of National Bank customers who chose to switch banks during the year, chose ANZ as their new bank. This underlines our own experience where, despite fierce competitor targeting of ANZ, and in particular National Bank customers, ANZ New Zealand went on to increase its market share in both deposits and lending in the first full quarter of the new ANZ. Our aim is to keep growing our market share as we work to build New Zealand’s best bank."
In a story in NZ Marketing magazine about the departure of the horse, ANZ chief executive David Hisco said that, based on its own research, 99 percent of customers didn’t care about the brand "as long as the person who serves them at the bank is going to be there the next day and the customer service levels are strong". In his opinion, the whole glue factory debate was a bit of a storm in a teacup. He said the biggest concern was the closure of branches and loss of front-line staff (20 branches are expected to be closed, leaving 280 across New Zealand, and ANZ plans to take over all National Bank sponsorship and community commitment, like Daffodil Day).
Some we spoke to at the time said evidence from previous banking combinations in New Zealand like National into Countrywide or Westpac into Trustbank showed there was about a five percent customer churn rate. But we live in very different times now. Back in the late ‘90s, around 85 percent of the country’s mortgages were fixed and couldn’t be broken, which meant many were forced to stay put after the name of their bank changed. Now, only around 35-40 percent of the country’s mortgage holders are on fixed rates, so there is much more freedom to change.
Added to that, other banks have actively communicated how easy it is to switch. As a result, some we spoke to thought ANZ was underestimating the power of the National Bank brand, the loyalty customers have to it, and the number of customers that would switch.
Jeffry Pilcher, publisher of The Financial Brand says some studies put the eventual defection rate of customers from a merger as high as 30 percent.
"The truth is that no matter how well the acquiring brand tries to mitigate defections, some percentage of people will switch no matter what, no matter how smoothly the transition is handled. Why? Because people hate change, even change for the better. Inertia is the huge factor playing in favor of banks acquiring other brands. They know that between things like online bill payments and direct deposit, it is a massive hassle for consumers to switch banking providers. So some people will never switch, regardless of how irritated they might get."