Online banking surge fails to dampen SME branch visits

New research reveals more Australians do their banking online rather than visiting a branch, although industry experts say face-to-face service still resonates with small business customers.

Market research agency Roy Morgan recently released its State of the Nation report, a major study of Australian consumers spanning more than a decade and consisting of almost a million interviews.

Over the past 12 years, internet banking use has risen from 1% to 45%. As of December 2010, 45% of Australian consumers had used online banking services in the previous four weeks, narrowly beating the 44% of consumers who visited a branch over the same period.

According to the study, ATMs have remained the most used banking channel, with 77% of Australian consumers having used an ATM in the previous four weeks.

However, ATM use steadied over the 18 months to December 2010, experiencing less than a 1% increase.

Meanwhile, internet banking is displacing phone banking, which has fallen consistently since a peak usage of 28% in January 2003 to 18% in December 2010.

Suela Qemal, finance industry director at Roy Morgan, says the popularity and convenience of the internet continues to drive customers towards internet banking.

“[There is a shift] away from traditional staff-based services of phone banking and the standard walk-in branch visit,” Qemal says.

“This shift has significant implications from the reduction in person-to-person communication, which erodes the key relationship and loyalty between a customer and their bank at a time when bank competition has never been so prominent.”

According to Dhruba Gupta, managing director of management consultancy DBM, small businesses still value person-to-person communication with their bank, identifying Westpac as a standout in this regard.

“Westpac seems to have done well in terms of their frontline, what’s happening at the branch [and] what’s happening in relation to their business managers,” Gupta told StartupSmart.

NAB Group executive Joseph Healy says the major banks need to reconsider their treatment of small businesses if they want to retain them as customers.

“Once upon a time, the banks were more attuned to small businesses, with the empowerment the local branch manager used to have and the role the local branch manager used to play in… local communities,” Healy said in a statement.

“Bankers had a good sense for what counts as well as what is counted.”