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Hitwise Intelligence - Alan Long - Asia Pacific

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Savings flight to quality

December 08, 2008

The ongoing economic conditions have the potential to shape and change many industries. We just need to read the newspapers each day to see the substantial changes the global banking and automotive industries are undergoing.

With each dark cloud though there is a silver lining, opportunities for businesses to either enhance their current positioning or to take share from more established and conservative competitors.

The most recent retail sales figures are not as disastrous as the newspapers would have us believe and in Sandra's recent post she highlights that people are still carrying on with relatively normal lives. But maybe the traditional Christmas retail period is hiding underlying fears and concern about 2009 and beyond.

At a consumer level the Australian banking landscape is stable. The Federal Government's savings guarantee no doubt eased the minds of many. But did the uncertainty leading up to that decision and ongoing bad news stories spook consumers and cause change in the profile or our Financial Institutions? Potentially causing a perceived "flight to quality", with the tier one banks benefiting.

Since the final week of last financial year (28 June, 2008) the tier one banks (ANZ, Westpac, NAB, Commonwealth Bank) have enjoyed an increase of 17.08% in share of visits as at week ending November 15, 2008, while over the same time period Credit Unions (including Credit Union Australia and Savings & Loan Credit Union) have increased by 12.95%.

shareofvisits

The jump in traffic to Tier One Banks in weeks ending October 11 and October 18 coincided with the Australian Reserve Bank's decision to cut the official interest rate by 100 basis points (October 7) and the Australian Governments announcements of the savings guarantee and the $10.4 billion stimulus package (October 13 and 14).

Credit Unions did not receive similar increases in visits suggesting users looking at a "flight to quality" within the perceived safety of the large Australian Banks.

The economic conditions will impact people differently at various life stages and we can expect changed online behaviour from each of these groups.

To help us understand these changes, the screenshots below (from our new Demographic and Lifestyle product upgrade), index the profile change of each custom category by Mosaic Lifestyle Group. Tier One Banks has experienced an increase from two of the larger groups – Family Challenge and Community Disconnect. These groups are distinguished by average to low incomes and are regarded as high credit risks. They live in outer suburban areas and small town Australia.

With exposure to manufacturing and construction industries, Family Challenge sees the changing landscape as a considerable threat. The Community Disconnect group has a considerable over 65 profile, greatly concerned with their retirement funds being depleted through the global economic malaise.

Credit Unions now see a higher representation of Suburban Subsistence, Pushing the Boundaries and Community Disconnect groups. Living in regional and outer suburban areas, with low incomes, the Suburban Subsistence group already finds money tight and with low qualifications any downturn in the manufacturing and construction industries will impact them harshly.

Young families living in new growth areas on the fringe suburbs and regional areas with exposure to the mining, infrastructure and manufacturing industries comprise the Pushing the Boundaries group. While earning above average incomes, the potential for impact in a slow down in the resources, building and manufacturing sectors will bring about hardship swiftly.

The previous two charts clearly point out that the groups most exposed to financial hardship have increased engagement with financial institutions.

The chart below compares the two custom categories (as of 4 weeks ending November 8) and highlights the exposure Credit Unions have with lower income and regional groups and the strength of the banks with middle Australia and wealthier segments of our community suggesting that this replicates their customer base.

The potential for hurt is not confined to any group, but the Credit Unions seem to have a higher risk profile based on online usage.

It is not middle Australia that is showing the most concern with their online financial behaviour but the young families, the retirees and the battlers. The economic downturn while affecting most Australians will be particularly harsh on these groups and they are looking for re-assurance, security and solutions from our financial system.

Can our financial system meet the changing needs of the community sectors?

I'd be interested to hear your views on the "flight to quality" and any anecdotal evidence.

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Posted by Alan Long at 04:52 PM | (0) | (0)