An immigrant father coming to Australia with no university degree, but a job opportunity with a bank that would change the rest of his life, his wife’s and ultimately, mine.
We live in an era of unprecedented human migration, and while millions are forced to leave their homes because of violent conflict or natural disaster, one of the main reasons behind people choosing to immigrate to Australia is economic – the search for better-paying work that will one day lead to a brighter future. The opportunities abound, not only for them, but for their children too.
For over 30 years, my dad was a banker who wore a suit and tie five days a week and commuted into the city from our home in the suburbs. Growing up, I was encouraged to independently choose my career path and make my own decisions about what my future job would be. I clearly remember my younger self thinking that “banker” or any position in finance was not going to make it on my list of future occupations. But today, many years later, I find myself working at the intersection of my own passion and my dad’s – finance journalism.
Having grown up watching my dad climb the corporate ladder of the banking world, I got to witness him reach some memorable milestones, including working in senior management roles at two of the big four banks – Commonwealth Bank and Australia and New Zealand Banking Group (ANZ), to now, working in risk and compliance for one of the big four consulting firms – KPMG.
His extensive experience across all of these years has come to shape my understanding of and attitude towards the big four and banking in general. In this piece, I delve into what the big four banks are, what makes them big, and whether they really are still the best – answering all of the same questions I had when I was a little girl, watching my dad leave for work in the mornings, briefcase-in-hand.
What makes the big four big?
The term Big Four – or Big 4 – is the colloquial name given to the four main banks in several countries where the banking industry is dominated by just four institutions.
In Australia, the big four banks refers to the four largest banks by market share, who between them hold 80% of the home loan markets in the country.
The big four banks make up four of the seven biggest companies on the local stock exchange by market value, worth around $360 billion combined.
Australia’s Big Four banks are:
1. Commonwealth Bank (Commbank)
2. Westpac
3. National Australia Bank (NAB)
4. Australia and New Zealand Banking Group (ANZ)
A longstanding policy of Australia’s federal government – “the four pillars policy” – was instituted to uphold this status quo, preventing any merger between Australia’s big four banks in order to maintain a competitive banking market. The policy has been maintained through the Global Recession of 2008-09.
The big four offer a wide range of deposit products including transaction accounts, savings accounts and term deposits and together offer the largest ATM network in Australia. These four banks hold the largest majority of loans in Australia and many consumers choose to do some or all of their banking with one of them.
The big four’s market share
| Bank | Market capitalisation* |
|---|---|
| Commonwealth Bank of Australia | $113.11 billion |
| Westpac | $62.70 billion |
| National Australia Bank | $57.37 billion |
| Australia and New Zealand Banking Group | $51.19 billion |
* As of June 2020. Source: ASX200 List
How do the big four differ from one another?
Here are some points of difference among the big four that may help you decide which is right for you or, if you’re just curious to know.
CommBank
- The youngest of the big four banks, the once-publicly owned Commonwealth Bank, is now the largest bank in terms of market capitalisation, largest ATM network in Australia and the most downloaded mobile banking app.
NAB
- In 1982, the National Bank of Australasia and Commercial Banking Company of Sydney merged to form National Australia Bank. It is the only bank account out of the Big Four that doesn’t charge monthly account keeping fees.
Westpac
- Initially starting under the name of Bank of New South Wales back in 1817, Westpac is Australia’s second-largest financial institution and has the largest overseas ATM network, allowing you to access more than 50,000 global ATMs fee-free through the Global ATM Alliance.
ANZ
- Established in 1835 under London-based, The Bank of Australasia, today’s Australia and New Zealand Banking Group is the first big four bank to offer Apple Pay.
While the big four banks all offer a similar range of products and services, there are some key differences to take into consideration. Choosing the right bank for you will always depend on your personal financial situation and needs. To find out which bank suits your needs best, consider the following features:
Competitive interest rate
In today’s low cash rate economy, Australians are hard pressed to find a savings account with a permanent and competitive ongoing interest rate. Whether you’re already banking with one of the big four or looking to, ideally, you want to find the best possible interest rate for you. To do this, you need to be aware of the two components of a savings account interest rate.
Base interest rate: This is the default interest rate on your savings account that you earn without having to meet any specific requirements or conditions.
Bonus interest rate: This is an added interest rate that some savings accounts offer on top of the base rate, either as an introductory rate for a limited amount of time – typically a few months – or as a ‘conditional rate’ that account holders could qualify for by meeting certain requirements each month.
For example:
- Depositing a minimum of X amount of money in your savings account each month
- Making zero or limited withdrawals each month
- Having a linked transaction account with X amount of money deposited each month
- Making a specific number of transactions each month using the linked transaction account
Ultimately, interest rates will help determine how quickly your savings can grow. Each of the big four offers a savings account that pays bonus interest rates if you meet their specific terms. Check out their accounts and rates in the table below to find out how much interest you’ll really be earning.
| Bank account | Savings account variable interest rate | Account conditions |
|---|---|---|
| Westpac eSaver | Maximum variable rate of 0.75% | First 5 months only, then reverting to 0.05% p.a. |
| ANZ Online Saver | Maximum variable rate of 0.45% | First 3 months only, then reverting to 0.05%. |
| NAB Reward Saver | Maximum variable rate of 0.70% | Must make no withdrawals and at least one deposit a month. |
| CommBank NetBank Saver | Maximum variable rate of 0.60% p.a. | First 5 months only, then reverting to 0.05%. |
Bonus rate conditions
Who would say no to making some extra money as a reward for saving your hand-earned cash? Bonus rates act as an incentive for account holders to keep money in their account for longer, rather than spending it. Which is why the conditions for earning the bonus rate should be a vital factor in the savings account you choose. If you don’t meet the requirements, you will only earn the base rate for that month. In other words, no free money for your saving efforts.
For example:
24/7 online banking
It’s 2020 – if you’re reading this, the bank you’re currently with has their own app. The big four banks all have Internet and mobile access, so the deciding factor comes down to which one offers the most effective, hassle-free online or mobile banking experience.
Have the big four peaked and fallen?
In late July 2020, a survey by market research platform, Glow, revealed Australia’s Big Four banks have improved their trust scores over the past three months.
Yet, despite these improvements in levels of trust in the big four, they still lagged behind smaller banks on overall trust, according to Glow’s research.
| Rank | Bank | Score | Previous rank |
|---|---|---|---|
| #1 | Bendigo Bank | 22 (+2) | #5 |
| #2 | P&N Bank | 22 (-) | #2 |
| #3 | ING | 20 (+1) | #6 |
| #4 | Bank of Sydney | 20 (+6) | #10 |
| #5 | Heritage Bank | 20 (+4) | #9 |
| #6 | Greater Bank | 19 (+4) | #1 |
| #7 | UP Bank | 19 (-2) | #7 |
| #8 | RACQ Bank | 19 (+4) | #3 |
| #9 | CUA | 17 (-3) | #4 |
| #10 | Beyond Bank | 15 (-1) | #8 |
* Source: Glow
As seen in the above table, neobanks such as UP Bank, are increasingly building a foundation of trust with more Australians. They are bringing a fresh approach to how consumers pay, track their spending, and manage their money – all without a physical branch but instead, using built-in smart technology that many traditional banks lack.
Speaking on these results, Glow’s head of insights, Eddie Kowalski says, “Our research appears to reflect society’s continued retreat to an increasingly nationalist mindsets and more community-based values during the coronavirus pandemic, with the suggestion that this is influencing where Australian consumers choose to bank.”
With each of the big four banks racking up billions of dollars in market capitalisation, it’s easy to believe that they appear to be maintaining their market dominance. But this is just that – an appearance.
According to ABC News, it seems the prosperous days of Australia’s big four banks have passed. With investors anticipating slower loan growth, increased competition and rising bad debts, the reality of these banks is that they have actually become smaller over time. ANZ, CBA and NAB are severing ties, or have already severed ties with their wealth management divisions following the 2017 Royal Commission’s findings of the big four taking fees without providing advice, not always acting in the best interests of their superannuation customers, or failing to pay out on insurance policies.
To varying degrees, the Commission found each of the big four banks acknowledged they had engaged in misconduct and conduct falling short of community standards expectations relating to home loans, credit cards, processing or administration errors and car loans.
As the veil lifts more and more on Australia’s big four banks, slowly but surely cracking down on their financial dominance, the days of easy profit growth for the big four are predicted to have vanished, with probability of not returning for years, or at all.
Bigger isn’t always better
As the daughter of a man who went from working for the banks for decades to now, regulating them and investigating their acts of misconduct, I continue to take away lasting lessons from his experiences, not only as a banker, but an immigrant who came to Australia. He climbed his way up in two of the big four banks and now, made his way into working for one of the big four consulting firms.
I grew up in what I would lightly call a “thrifty” household. One-storey homes far out in the suburbs in the rolling hills didn’t exactly entail a lot of extravagance. But what we did have was a spacious and comfortable home. We didn’t have the latest, most flashy cars, but we had cars that were still high quality and kept us safe all of our lives.
Looking back at the wisdom and habits I picked up from my dad, from him telling me to “always keep receipts” and to “pay for quality”, I realise now there are so many things that rubbed off on me and helped me make better-informed financial decisions.
The most important lesson: bigger isn’t necessarily always better, be it houses, cars, or banks.
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Oiyo is a consolidated online resource, we are not financial advisors. We work with a range of industry professionals and compliance check our articles to ensure factual accuracy. However, we do not provide professional financial advice. Consider seeking independent legal, financial, taxation or other advice to check how the information and ideas presented in this article relate to your unique circumstances.