Australian Retail Deposits 2019: Review, Forecasts, and Future Opportunities

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The Australian retail deposits market has been characterized by weaker growth of 5% in 2019 (A$1,168bn [$764bn]) compared to previous years and is forecast to grow close to that level until 2023. Weak GDP growth and poor consumer sentiment have persuaded consumers to save rather than spend, despite falling interest rates. The shrinking gap between deposits products has led to a market preference for on-demand deposits over term deposits. Meanwhile, fee income has fallen for the first time in years, driven by lower transaction account and credit product fees, as no-fee accounts become the norm.

This report provides information and insights on the Australian retail deposits market. It gives an overview of the recent retail savings and investments market environment. It analyzes the Australian macroeconomic scene, the competitive environment among the main players, and customer behavior and sentiment. It also provides an analysis of recent regulatory changes and proposals and looks at the most innovative neo banks in the market.

Scope

– Total deposit growth is forecast to remain at around 5% for the coming few years, amid a combination of weaker domestic growth, falling interest rates, and historically low consumer confidence.

– Superannuation is forecast to grow faster than all other major asset classes, primarily driven by the compulsory nature of the super guarantee. Authorized deposit-taking institutions (ADI), however, are unlikely to benefit from this as retail superannuation remains stagnant.

– A raft of neo banks have entered the market, all with highly competitive and flexible deposit products as well as a range of other innovative personal financial management tools and mortgage products.

Reasons to Buy

– Gain insight at both the micro and macro level of the Australian retail deposits market.

– Learn about the threats to deposit providers as well as potential opportunities such as new products.

– Assess the market’s latest trends and innovations.

– Compare the performance and strategic direction of your firm against competitors.

Xinja
National Australia Bank (NAB)
Australia and New Zealand Banking Group (ANZ)
Westpac
Commonwealth Bank of Australia (CBA)
Morgan Stanley
St.George
Bendigo and Adelaide Bank
ING Australia
Me Bank
Rabobank
Macquarie
86 400
Up
UBank
CoreLogic
Nationwide
Volt Bank
FinTech Australia
Monzo
Simple
Facebook
Chip
Cleo
Apple
Samsung
Alphabet
Fitbit
Garmin
TransferWise
Osko
BPAY
PayID
Afterpay
N26
Ferocia
Atom Bank
Metro Bank
Cuscal
Mastercard
Starling Bank

Table of Contents

Table of Contents

1. EXECUTIVE SUMMARY

1.1. Market summary

1.2. Key findings

1.3. Critical success factors

2. MARKET ENVIRONMENT

2.1. Growth in deposits is expected to be moderate

2.2. Bonus accounts re-emerge as the most competitive savings product

2.3. Consumers shun term deposits for on-demand savings

2.4. Fee and commissionincome suffers as pressure mounts on banks to reduce charges

2.4.1. Fees fall for the first time in years

2.5. Growths in almost all assets are forecast to be slower over 2019-23

2.5.1. Growth in superannuation from the retail sector is stagnant

3. MACROECONOMIC ENVIRONMENT

3.1. The economy is expected to rebound after a difficult 2019

3.1.1. Australia has been hit badly by recent economic shocks

3.1.2. Low consumer confidence tempts consumers to save rather than spend

3.2. The property market sees a small recovery

3.3. Low consumer confidence leads to a rise in the household savings ratio

3.3.1. The RBA is unlikely to delve into negative interest rates

3.3.2. The perils of lower rates for ADIs are not immediate

4. COMPETITIVE ENVIRONMENT

4.1. Branch-light players have generally fared better than incumbents

4.1.1. Levels of switching remain low but open banking and highly competitive neobanks in 2020 may boost it modestly

4.1.2. Neo banks have injected a new level of competition into the market

5. CONSUMER BEHAVIOR

5.1. ING leads NPS while incumbent players are hit by severe declines

5.1.1. The Banking Royal Commission has hit the Big Four badly

5.1.2. ING has long been favored by its younger digital clients

5.1.3. Bendigo and Adelaide Bank falters but remains strong

5.1.4. Bendigo and Adelaide Bank has sought to tap into a younger demographic with Up

5.1.5. Despite recent scandal, CBA and ANZcontinue to attract savings

5.2. There are signs that mobile will soon dominate the deposit market

5.3. Assisted saving tools lack broad support from keen savers in Australia

6. REGULATORY ENVIRONMENT

6.1. RBA delays open banking, citing security concerns

6.1.1. Fintech firms are taking open banking reform into their own hands

7. INNOVATION

7.1. Neo banks emerge in the Australian market

7.1.1. Deposits are the core product

7.1.2. Home loans prove the most popular way to earn revenue

7.2. Up has been the fastest neo bankout of the stable

7.2.1. Up has set out to be completely different

7.3. 86 400 has focused on building a simple banking experience

7.3.1. 86 400’s digital mortgage process is unmatched in Australia

7.4. Xinjalaunches with highestno-strings-attached rate

7.4.1. Xinja has a lot of ideas in development

7.5. Volt has no distinguishing features

7.5.1. The bank is likely to launch a range of products in 2020

7.6. UBank has updated to stay relevant

7.6.1. UBank still has some way to go to catch up to the neo banks

8. APPENDIX

8.1. Abbreviations and acronyms

8.2. Methodology

8.2.1. GlobalData’s 2019 Banking and Payments Survey

8.3. Secondary sources

8.4. Further reading

Figures

List of Figures

Figure 1: Deposit interest makes up an ever-decreasing share of new savings

Figure 2: The gap in rates between different products has shrunk, reducing the benefit of locking up cash

Figure 3: Depositors increasingly prefer easy access to their money

Figure 4: Net interest income has continually made up for falling net fee and commission income

Figure 5: Declines for credit product and transaction account fees contributed to the fall in fee income

Figure 6: Superannuation growth is forecast to overtake equities over 2019-23

Figure 7: Growth in super funds from retail compares poorly to industry and the public sector

Figure 8: GDP growth was significantly below the trend rate in 2019 but inflation remained stable

Figure 9: Wage growth has crept up in the last year but is well below long-term averages

Figure 10: Low consumer confidence has kept consumers from spending

Figure 11: House prices have begun to rise after a sustained fall

Figure 12: The household savings ratio sees sustained rises for first time in six years

Figure 13: Market shares remain steady after years of consolidation

Figure 14: Levels of switching remain low in Australia

Figure 15: There has been a significant decline in sentiment among consumers for Australia’s main banks

Figure 16: There has been a significant decline in sentiment among consumers for Australia’s main banks

Figure 17: Bendigo and Adelaide’s customers are significantly older than those of its rivals

Figure 18: Customers choosing a bank exclusively for saving is a useful proxy for a good savings provider

Figure 19: Mobile banking is likely to take over as the preferred channel for managing a savings account

Figure 20: Assisted savings products have a niche market in Australia for young, digitally savvy savers

Figure 21: The Tree of Up shows customers almost everything that has and will happen with the bank

Figure 22: 86 400 has focused on making its home loan process as simple as possible

Frequently asked questions

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