Our CFO Greg Taylor says an independent banking inquiry will help ensure more sustained competition in the financial services sector and that can only be good for business banking customers.
We all know competition is good for customers. I would argue it is good for businesses too. Yet there is a lack of competition in banking that is ultimately hurting business.
You know in your own business that having a competitor means you “sharpen your pencil” on pricing. Competitors push you to innovate and develop new services. Competitors give you incentive to cut waste and keep cost down.
You may have read or heard over the past week about a call for an independent inquiry into banking competition by the mutual finance sector. This sector is made up of credit unions, building societies and mutual banks that, unlike the big four banks, are customer owned rather than shareholder owned. Many Hunter people and businesses bank with this fifth pillar of banking but they are competing with one hand tied behind their back.
Why are they calling for an inquiry and how will it help your business finance? The answer is competition. Due to the fall-out from the global financial crisis and current industry regulations, the big four banks dominate the market-place and there is not a level playing field. For example, the mutual sector pays the government more than the big banks to guarantee their deposits. Their cost of sourcing funding is higher too.
New research shows 65 per cent of consumers support an inquiry. The research found that 79 per cent of people believe that the big banks make excessive proﬁt and 71 per cent of people agree that big banks have an unfair advantage. Half of Australians are also unaware that the big banks own a number of the smaller banks.
An independent inquiry will ensure that competitors to the big banks can survive to help businesses to continue to enjoy lower fees and charges, competitive interest rates on borrowing or investments, and better service and opening hours.
The major banks’ dominance is not good for business. Find out more and have your say at www.balancebanking.com.au or share your thoughts below.
This post is taken from Greg Taylor’s weekly Business Finance Column in the Newcastle Post newspaper.