Fewer Australians are placing their trust in Australia’s big banks, according to new data from Finder.
Trust in the big banks fell from a peak of 62% in April 2021 to 52% in October 2021, according to the comparison website’s Consumer Sentiment Tracker, one of the largest chronological monthly consumer surveys in Australia.
The most recent survey data revealed Boomers’ trust was at its lowest point, with only 41% placing trust in the big banks.
This, compared with 68% of those over the age of 65 who put their trust in small banks, and 57% of millennials.
Sarah Megginson, senior editor of money for Finder, said the insights signalled a shift among Australians towards trust in smaller banks, credit unions and non-banks as a safe place to keep their money.
“There was a massive shift to ‘safety’ during the pandemic, with people flocking to established brands they could ‘trust’ with their hard-earned cash,” Megginson said.
However, she suggested this retreat to the safety of Australia’s big four banks was ending.
“Now that the immediate economic threat has passed, and consumers are more interested in innovation and returns, smaller lenders are catching a lot of customers on the way out,” she said.
The data found that trust in small banks was currently sitting at 65% in October, down slightly from 66% a year ago.
Megginson said it signalled a “significant shift in the financial system” as smaller players gained a larger market share.
“Smaller lenders are innovating rapidly to compete with the bigger players and with open banking making it easier than ever to switch between different brands,” Megginson said.
Adding to this was the fact that “consumers are not as loyal as they were in the past,” she said.
The decline in trust also forecast a more competitive banking landscape for consumers.
“The loss of trust in the big banks should hopefully lead to more people shopping around, getting a better deal and ultimately saving money,” Megginson said.
While Ausralian’s trust in the established banking sector had declined, other research suggests it still eclipses that in the country’s nascent neobank sector.
A report released in May by open banking firms Frollo and EML suggested Australia’s trust in neobank lenders sits at just 10%, well below its faith in traditional banks.
Over two years after a royal commission exposed rampant misconduct, consumers still put twice as much trust in traditional financial services than they do in fintechs.
The report showed Australian consumers’ trust in the banks sits at 23%, overshadowing faith in the neobank lending sector, which sits at just 10%.
While users may trust fintechs and non-bank lenders to offer responsible loans, they still believe the big banks are more likely to keep their money and personal information under lock and key.
“Australians have a low opinion of financial service providers. The relationship is a rocky one, built more on necessity than trust,” the report said.
Finder’s sentiment tracker, which also tracks household savings, showed a slight decline in the average amount of reported monthly individual savings throughout 2021.
Its data showed savings sitting at between $800 and $900 a month in late 2020, with a drop to just over $700 in November this year.
The Australian Bureau of Statistic’s own data released at the start of September showed household saving decreased from 11.6% to 9.7% in the June quarter.
Nevertheless, Australians have still amassed significant savings since the start of the pandemic thanks to government wage subsidies and a reduction in discretionary spending.
The Commonwealth Bank in October estimated households could be sitting on $230 billion in accumulated savings by the end of this year.
Megginson said while household savings increased dramatically during the first 12 months of the pandemic, savings rates have declined as people returned to pre-pandemic consumption.
“While the monthly savings is still higher than pre-pandemic levels… it does appear to be trending down,” she said.