Mutuals (combined credit unions and building societies) are considered the least secure segment for retail deposits in Australia, despite the Federal Government guaranteeing deposits up to $1 million held by an Australian Deposit-taking Institution (ADI).
‘The Australian Cash Report Q1 2010’ released by financial research company, CoreData, has revealed only a handful of people (13.7 percent) consider deposits held by mutuals to be ‘very secure’, while 13.9 percent consider mutual deposits to be ‘somewhat not secure’.
Only one in eight Australians surveyed consider combined credit unions and building societies to be very secure for their cash deposits. Half of respondents considered the big four banks to be very secure.
While Australian investors felt more comfortable investing with the larger banks during the GFC, one quarter were unaware of the Federal Government’s deposit guarantee and most respondents had only some idea of what it was.
“The guarantee sought to slow the flight of investors towards the big four banks at the expense of the smaller players, but clearly the Government’s move to stabilise the system failed to resonate with consumers with a dramatic effect on competition,” CoreData Principal Andrew Inwood said.
More than one third of investors altered their portfolio weightings to hold more cash during the GFC, with customers willing to change banks to achieve a better rate of return.
“Customers are ready and willing to move banks to find the best rate of return,” Mr Inwood said.
“This trend has led to a great deal of customer turnover for Tier 2 banks as they introduce, then withdraw their promotional rates.
“There is around $508 billion currently being held in cash which investors plan to move into other assets – property and shares being the likely beneficiaries. The interesting question is who’s going to get this money: is it the financial advisers, the banks or the super funds, or will investors cut out the middle man and go direct?” Mr Inwood said.
The research also found Australians have less reliance on bank branches with just 7.8% considering accessibility to be the most important factor and only 3.6% ranking service as the most important.
“Interestingly, our research revealed the once popular phone banking service is now all but dead with the majority of respondents saying they never use it and conversely the use of online bank services is continuing to grow,” Mr Inwood said.