As you might know, there are 4 major Banks in Australia, Australia and New Zealand Bank (ANZ), National Australian Bank (NAB), Commonwealth Bank (CBA), and Westpac, that dominate Australian Banking sector. At the end of 2010, major banks accounted for 74% of resident assets, market share. CBA alone generated over 6 billion dollars in net profit after tax in 2011, which is astonishing if you consider the amount of Australian population. It is more than GDP of 58 countries.
The 4 big banks have dominated the banking industry for generations, but before the GFC, things were a bit different; small lenders had access to cheap finance options, which kept the competition alive, but as soon as the GFC hit, the cost of finance, especially for small players have increased dramatically, which gave major banks take full control. Another factor that played an important role in monopolizing banking was more regulatory burden that were imposed by government, in times of GFC. This allowed Big banks not only capture larger market share as a result, but also take over emerging (promising) banks, such as St George, Bankwest, Bank of Melbourne, Bank of South Australia and others, which they have successfully accomplished and called it Consolidation of Banks.
Government is under pressure to promote a healthy competition in Banking that is vital if Australia is to have sustainable banking industry. Monopoly not only leads to stagnant industry, but also results in worse outcomes for consumers. The Government, however, is finding it hard to come up with review and an action plan to promote competition, blaming the times of continuing economic troubles in the world. The Coalition plans to introduce more competition in the banking market and has formulated terms of reference for an inquiry if it wins office. But, will it happen, or will it be another unfulfilled promise?
Fortunately, there seems to be a light at the end of the tunnel, with promises from foreign banks and other financial institutions to enter Australian market. (there is some presence of foreign financial institutions, but extremely small; only 44 foreign banks are represented in Australia., which currently enjoy mere 9% of market share) There are also talks of companies such as Apple and Google that already entered financial services penetrate the Australian market that gives us a hope of a better future with more competition in Australia.
Moreover, consumers now can compare their rates online or go to a local broker, to find the best deal. However, I have learnt that naturally, people are simply lazy and most of us would not shop around to find the best rate in the market, but go with what our friend/family has recommended. On the other hand, this is changing, but at a very slow rate that is costing us in unnecessary interest payments, which we could have avoided if we switched to a better deal. To help speed this process, I have come up with a Mobile Application that can compare live rates for all lenders, which will make the comparing much easier, and less time consuming. Check it out and support the cause if you can here.