Transaction Banking Churn Set to Stay in Australia

Greater numbers of middle market CFOs and treasurers in Australia intend to switch their primary transaction bank, research from industry analysts East & Partners claims.


Customer churn in the corporate segment has risen sharply in the last five years as enterprises shift from a "better the devil you know" attitude to that of decided firm-footedness in considering rival transaction banking offerings.


This is evidenced by the number of businesses definitely considering changing their primary transaction bank in the next six months. The figure has jumped from 15.5% to 25.4% of total businesses since 2009.


Of the 897 enterprises surveyed twice a year for the Corporate Transaction Banking report, a combined 71.2% nominated the need for improved collateral, security and better pricing as the key reasons for changing primary providers.


The study also reveals that 14.6% of firms cite a need for more flexible terms, yet improved collateral remains the overwhelming driving force behind customer attrition in the corporate segment.


The report provides an in depth churn analysis, detailing customer churn by bank, key reasons for churn, likelihood of changing banker in the next six months and the single most important improvement desired in transaction banking.


Up to 15.6% of corporates have switched their international transaction banking product provider in the last six months, representing the highest level of customer churn within the transaction banking product suite. Remittance processing exhibits the least amount of customer churn, declining to 2% and trending lower over the last five years.


Forecasts of future market share and customer satisfaction rates are presented within the report, based on over a decade of trending data. These predictions indicate which banks are set to suffer the most from customer churn within the corporate segment.


East & Partners Senior Markets Analyst Martin Smith finds the metrics provide powerful insights into the decisions corporates make when allocating their transaction banking wallet.


“Two of the Big Four banks and one regional bank are struggling to cope with more than 5% of their own customers switching in whole or part in the past six months,” says Smith.


Smith adds that several international and regional banks have increased their customer retention rates significantly in the last three years, directly addressing customer concerns with product and service deficiencies that result in them switching providers in part or entirely.

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