Why you need to know who your bank is in bed with
Read the fine print on your financial institution, and you could find you're championing the big end of town.
It's no secret that Australia's banking industry is dominated by the big four - ANZ, NAB, Westpac and the Commonwealth Bank. However, their influence can stretch a lot further than many of us realise.
Some smaller banks that appear to be market minnows are actually bedfellows of industry titans.
Who owns who?
The issue of bank ownership has hit the headlines with the recent announcement that industry super fund-owned ME Bank is being purchased by Bank of Queensland (BoQ). ME will join Virgin Money Australia as part of the BoQ stable of brands.
It follows the news that NAB, which already owns online bank UBank, has extended its line-up to include neobank 86 400.
And don't be fooled by those cute green dragons of St George Bank, or the hometown feel of Bank SA. Both are owned by Westpac - as is Bank of Melbourne, BT and RAMS.
The Commonwealth Bank certainly doesn't operate in isolation. It owns Bankwest plus Aussie Home Loans, and in late 2020 CommBank announced a merger between Aussie and online home loan platform Lendi.
Australia's fifth-largest bank - Bendigo Bank, owns several brands including Adelaide Bank, UpBank, and Delphi Bank.
Does it matter that your bank is bedfellows with another?
There is a potential downside to holding accounts with banks that are subsidiaries of the same major brand.
The Federal Government's Financial Claims Scheme (FCS) protects deposits of up to $250,000 per account, per licensed bank. When two banks share the same licence, deposits over $250,000 are not protected.
Let's say for example, that you have $250,000 in savings with St George Bank, and a further $200,000 in a Westpac account. As St George is owned by Westpac, the two share a single banking licence. So only $250,000 of your money is covered by the FCS - not the combined sum of $450,000.
The situation would be different if you held $250,000 in St George, and $200,000 with, say, NAB. As they operate under separate financial licenses, the full $450,000 is covered by the FCS.
Is bigger better?
A more pressing issue for consumers can be competition. Australia has one of the most concentrated banking sectors in the world. As the Banking Royal Commission noted, the four major banks hold three-quarters (76%) of assets held in authorised deposit-taking institutions (ADIs), despite making up just 2.7% of the nation's ADIs.
That sort of market clout doesn't always result in a better deal for consumers. On the contrary, smaller banks often have to work hard to grow market share. As a guide, Mozo's 2021 National Savings Report found the average ongoing at-call savings rate across the big four banks is a meagre 0.18%, well below the market-leading rate of 1.35% with ING.
Fortunately, Australians still have plenty of choice in financial institutions, with options spanning credit unions, customer-owned banks and a decent selection of non-bank lenders.
And it seems more of us are voting with our feet to support the lesser-known brands - and secure good value. The latest AFG Index shows the four major banks and their associated brands currently account for 58% of the home loan market, down from almost 80% in 2013.
Taking a stance on your choice of bank may be an important personal issue. But don't overlook the goal of getting the best possible deal on the products that are right for you.