ComCom study mulled as trust in banks wanes

New research from Consumer NZ has found that trust in banks is dipping with 39% of New Zealanders stating they do not trust the banks. This is the highest level of distrust since Consumer began tracking sentiment in June 2021.

About 39% of people say they do not trust the banks. This comes on top of the banks’ soaring profits and the Government considering the need for a Commerce Commission market study on the sector.

Commerce Minister Duncan Webb says bank profits are top of mind when considering the next market study, but no decision has been made yet. Prime Minister Chris Hipkins also refused to rule out the possibility when asked at his weekly press conference.

“We’ve previously signalled that we’re concerned about the level of bank profits and that’s something that we will take some time to look at. It is something that we have foreshadowed previously that we would look at,” he says.

Banking customers are also frustrated with the level of bank fees.

“Even before the latest bank profits were announced we found people increasingly felt they were being charged too much by the banks,” Jon Duffy, Consumer NZ chief executive says.

“Our latest sentiment tracker data indicates, for people with personal debt, bank fees are taking an increasing toll, which highlights the growing burden of these costs,” he says.

Last week ANZ announced a half-year after tax cash profit of $1.107 billion, up 14% on the same period the previous year. BNZ’s half-year profit of $805 million was up 13.5% on last year.

“While we appreciate banks are not charities and should make a reasonable profit, the question is what level of profit is reasonable and at what point does profit become excessive,” Duffy says.

Westpac’s latest after-tax profit of $426 million represents a 33% drop on the same period last year. The bank says the drop in profit is partly due to setting aside funds to cover bad loans. Its profit before setting aside this provision for bad debt is up 8%.

Consumer’s latest banking satisfaction survey found a correlation between the size of the bank, and level of satisfaction with service – with the big four banks scoring the worst in customer polling. Over the past decade, hundreds of bank branches have closed their doors.

“Over a quarter of those we surveyed say the worst aspect of banking is related to their branch, or access to it,” Duffy says.

Consumer’s surveying has found that satisfaction with customer service and call centre service has improved over time. However, satisfaction with in-branch service and product and service advice is in decline.

“With the level of profits the banks are taking we would expect to see reinvestment in services leading to improved customer satisfaction levels across the board,” he says.

Earlier this week Westpac came under fire for deducting direct debits twice from some customers’ accounts – leaving many out of pocket.

Duffy says if banks reinvested some of their considerable profits to innovate and improve customer experience it may go some way to alleviating customers’ frustrations.

“Time and time again we are seeing the sectors that rake in the largest profits are the sectors with the lowest levels of competition and low levels of customer satisfaction. Competition benefits consumers, it forces providers to up their game to hold on to customers.”

Only 4% of New Zealanders switched banks last year, suggesting competition for customers is low. “We suggest people consider switching if they’re not happy with their bank. There is a perception that switching banks is difficult. However, of those that did switch banks last year 75% said the process was easy.”

Duffy says Consumer would like to see increased competition and some new entrant activity in New Zealand’s banking sector.

“The message is clear – amid huge profits, customers are not receiving a banking experience that they consider to be up to scratch and competitive.”