Trends in High Interest Savings Accounts in Australia

Table of Contents

• Overview
  • Catalyst
  • Summary
• Executive Summary
  • Market context
    • There are many competing products in the high interestdeposit area
    • Technology changed the playing field for savings accounts
    • Global financial conditions have sparked intensifiedinterest 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 majorproviders
  • Competitive dynamics
    • Margins are relatively low for deposit products
    • Foreign banks and regional banks have grown their share ofhousehold deposits
    • CBA is the market leader for high interest savingsdeposits
  • Future focus
    • Savings products will continue evolving
    • In time savings accounts and transaction accounts willmerge into a single product
• Table of Contents
• Table of figures
• Table of tables
• Market Context
  • Savings accounts have benefited from the increasedavailability of banking
    • Banking accessibility has increased strongly since the1980s
    • Bank branch numbers declined during the 1990s but haverecently 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 interestdeposit area
  • Global financial conditions have sparked intensifiedinterest in deposits
• Customer Focus
  • A broad range of Australians have high interest savingsaccounts
    • Most Australian consumers now hold at least one highinterest 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 monthlydeposits
    • More than half of savings accountholders have no specificpurpose for saving
  • Interest rate drives provider choice when choosing a highinterest savings account
    • Most accountholders choose their provider based on rates
    • Bank advisors and the internet are the most common sourcesof information
    • Fees and rates are the most important considerations whenswitching account
  • Online high interest savings accountholders havedistinctive characteristics
    • Online arranging savings accountholders are younger,better educated and have a higher income
    • Accountholders who arrange their savings online are morefinancially savvy
    • Savings accountholders with online only access are moreactive customers
  • Satisfaction with high interest savings account providersvaries
    • BankWest has the most satisfied customers of the majorproviders
    • Satisfaction metrics are especially important for highinterest savings account providers
• Competitive Dynamics
  • Providers mainly compete on the basis of rate andaccessibility 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 customeracquisition
      • Many products offer higher interest rates if certainconditions have been fulfilled
    • Accessibility of funds differs between products
  • Competition has led to low margins in the Australianmarket
    • Margins are relatively low for deposit products
    • Online accounts have revolutionized the market fordeposits
  • New entrants have challenged the big Australian banks
    • The five largest Australian banks hold 78% of householddeposits
    • Foreign and regional banks have grown their share ofhousehold deposits
    • CBA is the market leader for high interest savingsdeposits
• Future Focus
  • Savings products will continue evolving
    • Interest rates offered are set to stay high and marginslow
    • Product terms will continue to become more relaxed
    • Online accounts will become more prevalent
    • Product bundling has important implications for productdevelopment
  • In time the savings account and the transaction accountwill merge into one product
    • There are signs that savings accounts and transactionaccounts will merge into a single product
    • The convergence of account types will have profoundeffects on the Australian deposit market
  • Government initiatives will drive new product innovation
    • The Australian government has committed to makingfinancial product switching easier
    • The recently proposed First Home Saver Account scheme willcreate 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 frominstitutions 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 youhave?
  • Table 8: How much money do you currently have in yourmain high interest savings account?
  • Table 9: How often do you deposit money in your mainhigh interest savings account?
  • Table 10: Do you have a specific purpose/purposes foryour high interest savings account?
  • Table 11: Why did you choose this provider of highinterest savings account?
  • Table 12: What sources of information did you use whenchoosing your main high interest saving account?
  • Table 13: If you were going to change your high interestsavings account, which of the following would be important considerations?
  • Table 14: Demographics of high interest savings accountcustomers
  • Table 15: Financial attitudes of high interest savingsaccount customers
  • Table 16: Account behaviour of high interest savingsaccount customers
  • Table 17: Attitudes of high interest savings accountcustomers
  • Table 18: Satisfaction with high interest savingsaccount provider
  • Table 19: Average interest rates of the largestproviders for different products, March 2008
  • Table 20: Average margins of the largest providers fordifferent products, 2000-2008 (Table 1 of 3)
  • Table 21: Average margins of the largest providers fordifferent products, 2000-2008 (Table 2 of 3)
  • Table 22: Average margins of the largest providers fordifferent products, 2000-2008 (Table 3 of 3)
  • Table 23: Total bank household deposits, February 2008
  • Table 24: Growth rate in household deposits fordifferent institutions, 2002-2007
  • Table 25: Competitor market share of high interestsavings deposits
• List of Figures
  • Figure 1: The number of Australian ATM and EFTPOSterminals has grown strongly, 1990-2007
  • Figure 2: The number of bank branches declined duringthe 1990s, 1990-2007
  • Figure 3: Total deposits on the books of foreignsubsidiary banks have grown, 2004-07
  • Figure 4: Total bank deposits in Australia have grownstrongly, 1990-2007
  • Figure 5: Deposit products vary with regard to fundsrequired and availability
  • Figure 6: Average interest rates on bank CMAs haverisen, 2006-2007
  • Figure 7: Most Australian consumers have at least onehigh interest savings account
  • Figure 8: 56% of accountholders have less than $5,000 intheir main savings account
  • Figure 9: Half of savings accountholders make weekly ormonthly deposits
  • Figure 11: Rates drive choice of high interest savingsaccount provider
  • Figure 12: Bank advisors and the internet are commonlyused sources of information
  • Figure 13: Fees and rates are the most importantconsiderations if switching account
  • Figure 14: Online arranging mortgagors have a distinctdemographic profile
  • Figure 15: Online arranging savings accountholders aremore financially savvy
  • Figure 16: Online only savings accountholders are moreactive customers
  • Figure 17: Online only savings accountholders differ intheir attitudes
  • Figure 18: BankWest has the highest proportion of verysatisfied customers
  • Figure 19: Interest rates vary between different highinterest savings account products, March 2008
  • Figure 20: Margins have varied for different deposit products, 2000-2008
  • Figure 21: CBA has almost $100 billion in householddeposits, February 2008
  • Figure 22: Bank of Queensland has grown its householddeposit base quickly since 2002
  • Figure 23: CBA has the largest market share of highinterest savings deposits