INDUSTRY 2017 Key Brands, Market Challenges & Shifting Consumer Concerns Introduction

RETAIL BANKING INDUSTRY 2017 Key Brands, Market Challenges & Shifting Consumer Concerns Introduction

Retail Banking in Australia has changed significantly in the past 10 years. Gone are the days of dominance for “The Big 4” banks; Commonwealth, Westpac, ANZ and NAB. Retail Banking, in particular credit cards, has become available through supermarkets and even airlines, making it more accessible and convenient for consumers to sign-up.

Digital technology has been a top priority for retail banks over the past few years and continues to be a key success factor in 2017. As new disruptive technology players emerge, consumers are prioritising the ability to interact easily with banks.

In this report, we look at the top trends and takeaways for retail banks. We detail ways in which financial service providers can enhance their online experience and customer loyalty, through better use of competitor intelligence and customer data. State of the Industry

According to the Global Digital Banking Report, the top 2 initiatives for financial institutions in 2017 are: improving the digital experience and enhancing data to identify customer needs.

Over the past year alone, we have seen significant online growth among a diverse set of financial players, including non-bank lenders (e.g. traditional retailers and airlines), BNPL (Buy Now, Pay Later) solutions and financial aggregator sites (Finder, Canstar etc.).

Diversification of Players in Banking Growth in 2016

356% 59% 50% to BNPL sites visits to non-bank visits to financial lenders aggregator sites

1309% 22% 26% visits to visits to visits to afterpay.com.au qantascash.com finder.com.au

Data Collection: Hitwise Intelligence, yearly growth – Jan to Dec, 2016 How has this impacted the retail banking industry?

1. Digitalisation of the banking industry Australian’s banking behaviours are shifting online at an incredibly fast pace. The rise in searches for banking products (i.e. “credit card” searches up 83% YoY and “online banking login” up 29% YoY) not only suggests Australians are more confident with banking online, but there is also a growing expectation that financial institutions will offer these services online.

2. Comparison market infiltrates industry Financial comparison sites have grown significantly in the past 12 months which suggests that Australians are shopping around for the best offer or rate, and that loyalty towards banks is on the decline.

3. Growth in non-financial brand credit cards Linking your favourite airline or supermarket to your credit card to increase value for the consumer has not only become more popular amongst Australians, but it’s becoming the norm for many.

4. BNPL solutions are winning The immense eruption of consumer popularity with Buy Now, Pay Later solutions suggests that Australians are looking for alternative payment methods outside of credit cards.

In this report, we detail how banks can take a “digital first” approach and keep abreast of this fast-moving industry. Table of Contents

Taking a Mobile First Approach 1 Optimise search engine marketing for more effective campaigns by device

Audience Profiling by Financial Product 2 Identify online audiences during their research, and identify phases to assist marketing strategy

The Shift in Consumer Control 3 Understand the rise of aggregator sites and BNPL solutions, which give consumers greater choice 1 Taking a Mobile First Approach

The need to optimise the mobile experience has never been more apparent. With the release of Google’s Mobile First Index* and Accelerated Mobile Pages**, website parity across platforms is absolutely critical. Whilst content should always be aligned between mobile and desktop, search marketing should still take into account differing search behaviours by device. When we look at key action words that involve loan research (such as “personal loan” or “home loan”), we see that mobile is now the preferred device for both home and personal loans.

Searches with “personal loan”

Search Terms Search Share Desktop Mobile

1 personal loan calculator 26.15% 7.8% 18.4%

2 personal loan 18.34% 8.4% 10%

3 personal loans 17.98% 7.9% 10.1%

4 personal loan repayment calculator 9.81% 4.2% 5.7%

5 bad credit personal loans 4.03% 1.5% 2.6%

6 personal loan comparison 3.58% 2.1% 1.5%

7 unsecured personal loan 3.28% 1.2% 2.1%

8 personal loan rates 3.27% 1.6% 1.7%

9 best personal loan 2.30% 0.7% 1.6%

10 personal loans australia 2.22% 0.8% 1.5%

11 unsecured personal loans 2.17% 0.2% 1.9%

12 best personal loan rates 2.04% 0.9% 1.2%

13 compare personal loans 2.03% 1.3% 0.8%

14 personal loan interest rates 1.41% 0.2% 1.2%

15 small personal loans 1.39% 0.7% 0.7%

12 of the top 15 generic terms for personal loans were performed more on a mobile phone, rather than desktop. This suggests the user wants privacy — with the “bad credit” search ranking highly, this is no surprise.

*Mobile First Index – Google will prioritise mobile-optimised content on their results page ad, for the first time, take a domains mobile version of a site as the primary source over desktop. **Accelerated Mobile Pages (AMP) – Allows users to access content instantly within the search engines page and preview content without downloading on mobile device Searches with “home loan”

Search Terms Search Share Desktop Mobile

1 home loan calculator 44.29% 17.3% 27%

2 home loan repayment calculator 13.88% 5.5% 8.4%

3 home loan comparison 6.33% 3.3% 3.1%

4 home loan rates 5.72% 2.5% 3.2%

5 home loans 4.98% 2.8% 2.1%

6 home loan 4.58% 2.5% 2%

7 best home loan rates 3.42% 1.4% 2.1%

8 compare home loans 3.36% 2.5% 0.9%

9 no deposit home loans 2.54% 0.7% 1.8%

10 home loan interest rates 2.42% 1.1% 1.4%

11 reduce home loans 2.40% 1.2% 1.2%

12 reﬁnance home loan 1.78% 0.7% 1.1%

13 cheap home loans 1.60% 0.5% 1.1%

14 best home loans 1.39% 0.9% 0.5%

15 home loan borrowing calculator 1.30% 0.4% 0.9%

“Calculators” were top terms used in home loan searches and most searched on a mobile device. “Compare” and “comparison” were rated higher on desktop.

Data Collection: Hitwise Competitive Intelligence. Based on a portfolio of home and personal loan search terms 24 weeks ending 29 April, 2017. Understanding what terms consumers are using on each device can better arm marketers with insights to reach customers at the right time.

For example below, we can see that those searching for debt help on their mobile device are using more detailed searches, whereas desktop searches are shorter and to the point. Given the privacy of the mobile experience, consumers are able to type in more detailed (and personal) searches.

Top 10 Search Variations of “Debt” on Desktop

Term Desktop Rate Mobile Rate

centrelink debt jail 100% 0%

hot to beat the debt collector 100% 0%

credit card debt in australia 100% 0%

not paying hecs debt 100% 0%

teneant debt collection agency 100% 0%

judgement debt interest calculator 100% 0%

centrelink overpayment debt 100% 0%

does anyone avoid debt collectors 100% 0%

how you get out of debt 100% 0%

tenant debt collection 100% 0%

Top 10 Search Variations of “Debt” on Mobile

Term Desktop Rate Mobile Rate

debt ration 0% 100%

credit card debt 0% 100%

debt collection agency 0% 100%

debt collector 0% 100%

pay latitude before debt 0% 100%

debt recovery 0% 100%

hecs debt balance 0% 100%

debt ratio formula 0% 100%

cost of debt 0% 100%

debt to asset ratio 0% 100% Understanding how your competitors use search provides key insights into what terms are working, and what you should be bidding on.

For example, let’s look at specific search terms used by those currently seeking out a new credit card*, and which brand is gaining the most traffic from those terms.

“Apply” Search Term Downstream Traffic 12 weeks ending April 29th, 2017

0% 5% 10% 15% 20% 25%

Commonwealth Bank of Australia CommBank is Finder.com.au receiving the National Australia Bank greatest share ANZ Australia and New Zealand of traffic from Credit Card Compare Westpac Banking Corporation the search term Coles Insurance “apply”, well Commonwealth Bank NetBank ahead of its Citibank Australia competitors. BankWest

“Rewards” Search Term Downstream Traffic 12 weeks ending 29th April, 2017

0% 5% 10% 15% 20% 25%

NAB and Finder.com.au CommBank National Australia Bank show strength Credit Card Compare in credit card Commonwealth Bank of Australia rewards, Mozo receiving the Canstar largest share of traffic from ANZ Australia and New Zealand “rewards” American Express searches. Suncorp Westpac Banking Corporation

*Those who have searched for “best credit card”, “transfer credit card”, “credit card rewards”, “compare credit cards”, “low fee/rate credit cards” and “apply for a credit card”

Track differences in search behaviour across mobile and desktop, and take into Top consideration the intention and mindset behind searching on each device. Take note of language and length of searches. Identify your strengths, and which terms are going to Takeaway your competitors for which products and searches. 2 Audience Profiling by Financial Product

Banks have full visibility over their existing customers, but not necessarily their potential customers. One way to track online audiences in their “research” and “consider” phase is through search behaviour and page visitation.

We analysed people who searched for loans and visited loan pages to illustrate these audience differences. It seems first home buyers (age 25 -34) are most likely to search for the perfect loan; they are not only the more engaged in loan searches, but most likely to visit loan pages on aggregator sites.

Loan Visitors - Banks vs. Aggregators by Age Group

60 +52% +40% 40 Banks Aggregators

20 +11% 0 -6% -3% -7% -2% -20 -11%

-40 -33% First home -40% -60 buyers breaking into the market -80

-100 18-24 25-34 35-44 45-54 55+

Banks Aggregators Not surprisingly, given the property market in Australia, those with high household incomes ($80k+) are also more likely to be conducting loan searches. Aggregator sites perform stronger overall, suggesting Australians are seeking out the best possible deal, rather than sticking to one financial institution.

Loan Visitors - Banks vs Aggregators by Household Income

Less than $39,000 $40,000-59,999 $60,000-79,999 $80,000-99,999 $100,000 or more 60 +41% 40 +30%

20 +10% +14% +17% +5% 0

-20 -18% -24% Strong skew towards -40 -31% -37% high income.

-60 Banks Aggregators

-80

-100

Data Collection: Hitwise AudienceView Intelligence, Visitors to top 5 Aggregators & top 5 Banks for Loan pages, 12 rolling weeks to 4-Mar-2017. Understanding who is searching for particular loans can guide marketers on what content should be targeted to which consumer.

Profiling 5 different loan types; car, payday, business, personal and student shows that the audiences differ quite a bit depending on the loan type.

In this example, we see car loans are more likely to be searched for Millennials under the age of 34, perhaps those seeking a first car, while pay day loans reached a wider age range of 18-44.

1 2 +6% +5%

25 3 59 +59% +58%

35 +1% +29%

55 -33% -48%

55 -39% -41%

Throughout all loan types, we see that age 25-34 is generally the sweet spot for all loan types, while people 45+ are less likely to be seeking out loans. Some loans are more appealing to 18-24 audiences (student and personal loans), while others (business loans) attract a more mature crowd.

1 2 -8% +152% +10%

25 3 +33% +43% +49%

35 +19% -33% +5%

55 0% -41% -16%

55 -40% -68% -42%

Data Collection: Hitwise AudienceView Intelligence, Loan searches split by age group, 12 rolling weeks to 4-Mar-2017.

Top Understand who is seeking out what kind of service, and target relevant Takeaway messaging to the right audiences. 3 The Shift in Consumer Control

If the staggering growth of AfterPay (1300% last year) and comparison sites like Finder (157% last year) is anything to go by, then it’s clear Australian consumers are demanding greater access and control of their products, deals and payment options. In this environment, maintaining loyalty is more difficult. Understanding this consumer shift will assist brands in knowing what they are up against.

Comparison sites are now the norm.

With such strong growth of bank comparison sites, it suggests that loyalty towards financial institutions could be on the way out. Consumers want the best deal and rate, and many of them are finding it through non-traditional institutions.

Search data around ‘credit cards’ highlights the shift from traditional financial institutions, to brand- affiliated credit cards.