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Australian banks have recently seen reforms in the field, which now require them to hold more liquidities in their reserves. This reality, corroborated with the fact that consumer sentiment indices remain low enough as to not point toward a resurgence in credit demand at any point in the foreseeable future, has made banks ‘hungrier’ for their clients’ cash than ever. On the one hand, polls investigating the current mind frame of the general population reveal that Australians are now saving more than ever. Interestingly enough, the proportion of the population who says they are genuinely struggling with debt is not overwhelming; however, credit card demand has dropped and will likely continue to dwindle. As such, banks are left with precious few alternatives for attracting new business. There has been talk of a focus on mobile banking, as well as on business loans for SME start-ups. However, the most fertile ground in this respect seems to be the regular, day-to-day transaction account.

In recent news, Australian bank Bankwest has announced the fact that it is about to introduce a rewards program for clients who use their transaction accounts. This rewards program will be very similar to bonus programs that are already being employed by retailers, in order to thank their regular, returning customers. According to the bank’s retail chief executive, Vittoria Shortt, such programs are Bankwest’s preferred method for attracting new customers. However, as the focus shifts resolutely away from borrowing, debt, and credit, to savings and term deposit, Bankwest key decision makers felt that the time had come for the bank to reward their transaction account holders, too. Through this program, Bankwest will reward both clients who choose to save with them, as well as those who spend through them. Savings accounts customers are rewarded when they hold at least $2,000 in their rewards account.

The system is point-based and essentially works along the principle that the higher the client’s account balance is, the more rewards are they likely to receive. The points are relayed through the average account balance, which is updated on a daily basis and can be redeemed each month. Bankwest customers choose what to spend their reward points on – and who to spend them with. The list of bank-selected retailers includes airline operators, as well as gourmet food and wine shops.

Analysts in the field are pointing out that the transaction account is the first and most important building block in the relationship between a bank and their client. Usually, a client that chooses to open such an account will most often follow up with other products, from mortgage loans to credit cards. According to Canstar analyst Adam Beu, Bankwest’s move is only revolutionary in Australia, because elsewhere around the world, banks have been offering rewards programs for transaction accounts and debit card use for quite a while now. Thus far, Australia had only seen credit card-centered reward systems, but debit-oriented ones have been previously used in the United States. The same expert is quick to add that this move indicates that banks are veering away from their focus on making money out of interest rates. His view is substantiated by Australia’s MasterCard country manager, Andrew Cartwright, according to whom deposits and debit cards will always be a high priority for the country’s banks.

Transaction accounts are preferred by banks not simply because they attract new clients, but also because they don’t have to pay holders too much interest – or any whatsoever, for that matter. They can, however, be linked with savings accounts, which offer a higher income from interest.

Anne

I'm a mother of 2 who likes to get involved in too much! Besides writing here I started a non-profit, I'm on the PTO board, very active in my community and volunteer in the school. I enjoy music, reading, cooking, traveling and spending time with my family. We just adopted our 3rd cat and love them all!

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