Will National Bank customers really switch banks?

There is a saying that leaving a bank is like leaving your wife.

If that is true, have rival banks pounced in vain on ANZ with their creative advertisements seeking to lure customers from its swallowed-up National Bank?

Changing banks is not something most customers look forward to, particularly business people who would face additional transfer costs such as reprinting invoices with new account numbers for direct internet banking payments, for example.

Relationship banking also tends to be more important for small businesses, so moving banks and forging new relationships with the ‘bank manager’ is not an attractive prospect.

So has more been made of the merger between ANZ  and National Bank than may be reality?

Continuity of people
Yes, says one accountant spoken to by NBR ONLINE.

Leicester Gouwland, whose Auckland-based accounting firm William Buck Christmas Gouwland recently went through its own merger, says when it comes to service businesses, such as banks, it is continuity of people the customers deal with which becomes the critical factor in their retention.

“If, in reality everything is the same, apart from a different name or branding, then everything just moves on smoothly,” Mr Gouwland says.

It was likely ANZ Bank New Zealand's competitors are trying to create uncertainty for their own advantage. ANZ and National have been a single legal entity for a while now and most business customers were likely to have known this.

“It is costly to change banks so there needs to be a very good reason for a business to change.”

NBR ONLINE understands there is little concern from ANZ Bank’s business customers about the merging of the brands. They have been spoken to directly and, generally, once they have the information they need, its banking as usual.

Massey University senior banking lecturer Claire Matthews says she would be surprised if the bank merger did not go well from ANZ’s perspective.

Estimations that ANZ could potentially lose up to 40% of its National Bank customers by dropping the brand were “worst-case scenario".

ANZ would have prepared itself well for the move, she says.

“They won’t have done it at short notice, and I would expect them to be making use of what the National Bank has learned in previous mergers. Therefore, they will be minimising the real change for customers and keeping them informed through the process.

“But at the same time, change is always unsettling for people so it is natural for the other banks to try to capitalise on that uncertainty and try to attract NBNZ customers.”

Financial cost involved
While a new bank could cover some of a customer’s financial cost associated changing banks, they could never foot the full bill.

And when you include indirect costs, such as rebuilding relationships, that cost could become quite high.

“There needs to be a good reason for a business to change banks and a change of colour scheme – from green to blue – probably isn’t sufficient,” Ms Matthews says.

When Northland communities Maungaturoto and Waipu lost a National Bank branch in May 1999 much was made of customers planning to close their accounts in protest.

Ms Matthews looked at the closure in her  2000 Masters research report and her findings revealed only 13% followed through on their plans to change banks.

“When the normal churn rate is 5% that’s not really a big difference, particularly given National Bank had an above average market share in both communities due to being the last bank in town,” Ms Matthews says.

Dropped within a year

Across the Tasman, a bank brand study by Australian research house Nomura Equity Research reveals banks generally drop their acquired brands within a year after acquisition.

Lack of product differentiation in banking was the main reason for moving to a single-brand model, as well as opportunity costs associated with a multiple-brand focus.

“In a low-growth environment, multiple banking brands in the same market are increasingly difficult to justify,” Nomura said in the September report.

Nomura expected that, over time, it believed all major banks could look to reduce the number of brands in their portfolios.

A related survey of 500 bank customers, also by Nomura, confirmed that moving banks was tough.

“A majority of customers identified difficulties in moving banks as a key reason for not switching, even when they were dissatisfied with their bank.

Are you a National Bank customer? Will you stay with ANZ Bank? Contact gbond@nbr.co.nz