For marketers, a key takeaway is that people are willing to change lenders, but not for all the same reasons. Why people switch and which lender they’ll move to can vary according to the type of credit product they’re after, and their age bracket.

‘Switching’ in the context of this report refers to consumers having switched one or more of their credit services – credit card, home loan, personal loan or car loan – to another credit provider in the 12 months to June 2019. 

Although the financial services industry has experienced a downward trend in credit demand (-5.9 per cent year-on-year to June quarter 2019), significant pockets of credit remain. Over the past year, 10 per cent of Australian consumers have switched credit providers, and a further 11 per cent indicated their intent to apply for credit between June to August 2019. Of these, 53 per cent openly canvassed the option of switching providersi

So how to identify these credit-active consumers? Here are nine insights that marketers can use to piece together a clearer view of current and potential customers.

# 1: Millennials are the only age group to prefer banking at a building society or credit union

Our research revealed that for switchers of home loans and personal loans, it’s the first-home buyer demographic of 18 to 34-year-olds that prefer to use a building society or credit union. These banking institutions were the top choice for 42 per cent of millennial home loans and 41 per cent of personal loans.

# 2: All other age groups favour smaller banks

For consumers aged 35 to 65, smaller lenders are the preference when switching home loans and personal loans. Rather than choosing a building society, credit union, big bank or non-bank, this age group embraced the offerings of small banks. Among 35 to 50-year-olds, 55 per cent of home loans and 39 per cent of personal loans preferred smaller banks. The margin was slightly lower for 51 to 65-year-olds.

# 3: For credit cards, the Big Four banks came out on top

When it comes to switching credit cards, all age groups prefer the Big Four banks.

While all ages are active in moving their credit cards, there is a slightly higher switching tendency among older consumers – aged 50 to 65 years. 

# 4: Auto loan borrowers show different preferences to other credit customers

Young people who switch car loans prefer smaller banks, whereas older groups tend to prefer auto lenders. It’s this older group where the opportunity to apply for auto credit is highest: 22 per cent of consumers aged 65+. Compare this to 14 per cent of consumers aged 35-65 and 12 per cent for the 18-34 age group. There’s an even split between consumers looking to buy a new or used car.

# 5: People switch credit cards because they don’t like the customer experience, and they want a lower cost option.

Our findings show that for 21.9 per cent of credit card customers, a poor customer experience was enough to make them move away from their credit card provider. Lower cost (46 per cent) and loyalty reward programs (40 per cent) remain the top reasons for switching. Loan features like balance transfer and $0 annual options are also highly regarded, with 20.9 per cent of customers citing these as reasons for changing providers.

# 6: Home loan customers are keen to keep costs down

For most home loan switchers – 58 per cent – the driving force behind their decision to find a new provider was to lower the cost of their loan. Poor customer service (16 per cent) and brand reputation (15.6 per cent) were also responsible for driving customers away. For millennials, brand reputation was particularly influential, with 32 per cent of consumers in this age group citing it as the reason they switched.

# 7: The millennials and baby boomers are the age segments most likely to soon apply for personal loans 

While only a relatively small portion – 16 per cent – of consumers switched their personal loan in the past 12 months, more are expected to change soon. The age groups most likely to apply are those aged 18-34 and 51-65 years old. Of those who have shifted, the most common driver was lower cost (47 per cent), with interest rates of specific concern (80 per cent). Next was brand reputation (30 per cent) and better customer service (11 per cent). More males than females gave credence to brand reputation.

# 8: What people look for in an auto loan varies by age

When looking to change auto loan providers, quick approvals are an essential consideration for young consumers (18 to 34-year-olds). By comparison, early payment options are a chief concern for the 51 to 65 age group. Poor customer service has driven 17 per cent of customers away from their auto lender.

# 9: Data & analytics makes it easier to understand your customers

In the face of increased competition, erosion of brand trust, tighter lending criteria and the move to Open Banking, it’s more important than ever to understand why customers switch. Equifax Marketing Services brings together data and advanced measurement tools to help lenders answer questions like ‘who should I be targeting’, ‘what are consumers looking for’, ‘why are they switching’, ‘where are they going’, ‘how can I hold onto them’. 
 

Interested in more of the above, but this time tailored to your current and potential customer base? Contact Equifax Marketing Services to find out how you can use data and analytics to help navigate the complexities of appealing to millennial consumers.

 

i ReachTEL poll commissioned by Equifax was undertaken in May 2019. ReachTEL conducted a survey of 4,922 respondents nationally. The survey was conducted during the week of Monday 27 May to Friday 31 May 2019. Credit intentions were polled in relation to June to August 2019.

Disclaimer: The information, materials and opinions contained in this article are for general information purposes only, are not intended to constitute legal, financial or other professional advice and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances.

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