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Chris Roberts’ Expert Opinion On ING In The Financial Times, Netherlands

Chris Roberts’ Expert Opinion On ING In The Financial Times, Netherlands5 min read

ING benefits ‘down under’ from distrust of Australian banks

(This article has been translated from Dutch to English.)

In brief:

  • ING is growing fast in Australia because consumers have lost confidence in local banks
  • It is currently the largest foreign bank on the continent
  • However, it will be difficult to break the oligopoly of the big local players

ING is booming in Australia. There customers switch to the Dutch bank, because they have completely lost their faith in local banks after a series of scandals.

In the Netherlands, ING’s image received a heavy blow last year due to a fuss about the salary of top executive Ralph Hamers and the failing anti-money laundering policy. This resulted in a fine of € 775 million for the bank. But in Australia the Dutch bank, which operates there with its subsidiary ING Direct, is popular and enjoys a lot of confidence.

Last year, ING Direct was able to register 645,000 new customers in Australia, 57% more than one year previously. ING is doing very well in Australia: with around two million private customers, it is the largest foreign bank on the continent. ING is the fifth bank in the 25 million population country. Only the four large traditional Australian banks, ANZ, NAB, Commonwealth and Westpac are (much) larger. Together they hold about three-quarters of the market. But that oligopoly shows cracks. ING sees opportunities for further growth in Australia.

Log the Bank

ING has been active in Australia since 1997 with ING Direct. This mainly offers consumers online products and has no physical locations. In Australia, ING focuses on smart technology, which is precisely what Australian consumers need: the cumbersome Australian banks have been struggling for years with the switch to banking in the internet age. For example, ING was the first to accept Apple Pay, Apple’s mobile payment service that allows users to pay with their iPhone.

It was also the first bank that does not charge for the use of an ATM. For the Australians that is a relief, because everywhere the cash withdrawal costs around € 1.50 as a standard. Furthermore, the bank does not allow credit card debts to run too high, by forcing customers to automatically pay off on time. In a country where everyone pays for everything with the credit card and debit rates often amount to 20%, it is revolutionary and an initiative that many Australians welcome. A relatively high savings interest rate also makes the bank attractive.

Collective failure

But something else plays a role. The Dutch bank has benefited since last year from a collective failure of the Australian banking sector. In recent years, a government investigation has uncovered numerous abuses at Australian financial institutions. During painful public interrogations at the committee of inquiry, it became clear how rotten the Australian banking system was. The interest of the customer was secondary to the profits. The supervisor was structurally fooled.

The examples of misconduct were deadly for banks’ reputation: banks, for example, deliberately collected the costs of bank accounts of customers who had died. Financial advisers gave consumers wrong advice in exchange for bank commissions. Even the mentally retarded were disadvantaged. Publicized sound clips, for example from a telephone conversation between a bank employee and a man with Down syndrome in which he was pressured to open an account, aroused anger across the country.

Others Also See Opportunities

ING is not the only foreign bank that sees opportunities on the Australian market. European and British banks grew over 8% in Australia last year, Asian banks even 16%. The financing of large infrastructure projects is particularly interesting. Barclays, which left the continent in 2016, recently reopened a branch there in Sydney. The British HSBC is intensifying its activities and saw its outstanding loans grow strongly last year. The French Société Générale has also been back in Australia since May, where it primarily wants to finance sustainable energy projects. the agricultural sector. Last year, Rabobank made a profit of more than 216 million Australian dollars. The bank received a slap on the fingers of the Australian financial sector regulator last month. The bank must pay more attention to internal cash flows, the so-called intra-group funding. The regulator set stricter rules. They must prevent the liquidity of the Australian departments of international banks from being put under pressure if the parent company demands credit in a crisis situation. However, the regulator emphasized that Rabobank Australia is in excellent financial shape.

ABN Amro recently received a banking license and in March opened a branch in Sydney, with which it wants to support business customers. The bank has been running a clearing office in Sydney since 1998.

As a result, Australians have completely lost their faith in the local banks. The four large banks saw their customer satisfaction plummet below zero: customers actively discouraged the ‘Big Four’. ING emerged largely unscathed from the affair and since then Australians have trusted the Dutch. Since the scandal, 400,000 people switched to the Dutch bank, which in a survey last October ended up in the top ten of most trusted brands in Australia.

Lucrative market

The Australian market is lucrative. Last year, the Australian branch of ING made a profit of 401 million Australian dollars (€ 245 million), a growth of 15%. That means that just under 5% of ING’s worldwide profit (€ 4.7 billion last year) comes from Australia.

“The Australian banks are very similar and ING is a fresh exception,” says consultant Christopher Roberts, who recently asked 1400 Australians about their perception of the banks. ‘Consumers believe ING’s message if it states that the costs are low because the bank has no physical locations. Australians are sensitive to this: bank charges are a kind of bad word here. ‘

Remarkable boost

Roberts believes that ING cannot break through the oligopoly of the major Australian banks. ‘The large banks are catching up. The question is whether ING can still be distinctive. Moreover, banks can make the fur, because no matter how dissatisfied people are, nobody likes to switch. ” New regulations should make switching easier from this month. ING received another remarkable boost: the popular Australian author Scott Pape, whose book on personal money matters has been sold more than 1.5 million times, always urges his readers to bank with ING.

ING sees more opportunities in the Australian banking sector. The bank wants to increase its share in the mortgage market, of which it now holds 4%, with 58 billion Australian dollars (€ 35 billion) in outstanding loans. For comparison: the four major Australian banks each have more than 800 billion Australian dollars on the balance sheet. ING’s business practice should also continue to grow last year.

By |2020-10-12T21:59:23+10:00March 4th, 2020|

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