The Federal Government will examine how to make it easier for borrowers to switch lenders, considering measures such as introducing portable bank account numbers.
Currently, the major banks’ IT systems can’t relay customers’ information to other banks, ultimately locking lenders in with one institution.
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The technology required, called LIXI, is available on the market and would facilitate the transfer of information including customer data on loans, offset accounts, deposits and personal details.
Earlier this year, Treasury official Jim Murphy said switching lenders was one of the best ways to stimulate competition.
Council of Small Business of Australia executive director Peter Strong agrees, claiming a portable bank account will create a more level playing field for consumers and smaller lenders.
“If we have a portable bank account number, that means we can move banks very quickly; the little banks can offer new products; the independent brokers can offer new products and you’ll have a whole new marketplace,” Strong says.
The push for increased competition in the banking sector coincides with the launch of Better Banking, an initiative by consumer watchdog Choice.
The campaign is aimed at improving customers’ banking experiences with better services, fairer products and decent practices.
According to Choice, almost 80% of bank customers have not considered switching to other financial institutions because of the effort involved and the fear that it will make little difference.
Better Banking campaign director Richard Lloyd says the banking crisis has moved from a global to a local level as consumers lack confidence in the banks’ ability and willingness to compete.
“Despite the government’s bank switching push, only 7.6% of Australians have switched bank accounts in the last two years,” Lloyd says.
Australian Bankers Association chief executive Steven Münchenberg says imposing account portability measures will increase IT costs for financial institutions and hit smaller lenders harder.
“Some smaller financial institutions would have more trouble absorbing the costs – major IT projects are proportionally more costly for the small financial institutions,” Münchenberg says.