Loyalty or laziness? Whatever you call it, the banks are cashing in


Those “super-saver” deposit accounts – where banks offer bonus interest rates – are enticing. But the ACCC found 71 per cent of those accounts did not receive any bonus through the first six months of the year.

According to the commission, consumers miss out on higher interest rates because of what it described as “ongoing barriers to searching for, and switching between, retail deposit products”.

To inject a bit of competition into the sector, the ACCC reckons the federal government should re-examine the idea of making bank account details like your mobile phone number. That is, portable.

The idea of a moveable bank account first emerged under then treasurer Wayne Swan around 2009 and 2010.

It had not been all that long since mobile phone portability had become established.

ACCC chair Gina Cass-Gottlieb says consumers are being affected by the actions of banks and electricity providers.Credit: Natalie Boog

Consumers, fed-up at being forced to change their phone number if they moved to another provider, exerted pressure on governments and telephone companies to come up with a better system.

And they did. Nowadays, no one gives a second thought to their phone number moving with them if they get jack with their provider. Banks, however, pushed back at the suggestion that such a change could be implemented across the Australian financial system.

But when the Rudd-Gillard-Rudd government came to its demise in 2013, the idea of bank account portability also died.

Just an hour after the ACCC released its interest rate report, it delivered one was into the national electricity market.

Most recent research into electricity has looked at the offers made by retailers to potential customers. The ACCC, though, had a look at what retailers are doing for their existing customers.

Just like banks, power companies are all chocolates and flowers at the wooing stage of the relationship, but it quickly turns into threadbare undies and dirty dishes on the kitchen bench once we sign the dotted line.

The commission said existing customers pay a loyalty penalty that is leaving them hundreds of dollars worse off every year compared to new customers. In Victoria, for instance, only half of all residential customers were on their power company’s cheapest offer.

But it’s not just a Victorian thing. The report said, “In all states, customers on older plans are paying higher average prices than those on newer plans.”

And as the commission noted, the power companies know what they are doing.

“Our analysis suggests that retailers recoup their costs over a customer’s lifetime, by setting attractively low acquisition offers and making subsequent unilateral price increases for their existing customer base over time,” the report found.

In another striking similarity with the bank deposit report, the ACCC also found problems with cheap price offers which come with various conditions.

Almost a quarter of people in hardship cases (that is, struggling to pay their bills) failed to achieve their conditional discounts, and then subsequently copped an “effective price penalty”.

Little wonder that the ACCC recommended governments and independent pricing tribunals look at ways to reduce the number of customers on old plans “as a matter of priority”.

Money you have in the bank, and keeping the lights on (as well as every other electrical appliance in your home), are two very important and costly aspects of modern life. Yet in these two cases, Australians are effectively handing over billions of dollars to companies.

It’s easy to blame the banks and energy providers for what they do. But as consumers, we let them.

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Sure, life gets in the way. The dog needs to go to the vet. Kids have to be trucked off to a never-ending series of birthday parties. At the end of a busy day/week/month, who wants to sit down and look at the paperwork involved in a new electricity contract or go through the hassle of tracking down the best deposit interest rate?

But that’s what the banks and electricity companies are betting on. That’s why their focus is on winning your custom in the first place, confident that while you’ll whinge and moan you won’t actually do anything to change the situation.

Prize loyalty in a footballer may be honourable. But as a consumer, loyalty is a loser’s game.

Shane Wright is a senior economics correspondent.

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