the mozo blog

A story came out this week that seemed 10 years too late – owing to a computer glitch, a sizeable number of Bank of Queensland and BankWest ATM and eftpos machines malfunctioned and stopped working. The reason? An internal clock in the devices ticked over to 2016 instead of 2010, thereby rendering any card with an expiry date earlier than 2016 out of date.

It was always a disappointment to me when the millennium rolled in and nothing happened. Kevin Costner had a large part to play in this, my desire to live in a barren post-apocalyptic wasteland piqued after watching Waterworld. I bought the canned goods and the bottled water. I sacrificed an entire summer’s worth of backyard cricket so I could construct a fallout shelter in the garden. So it was with glee and perhaps the tiniest glimmer of hope that I read about this latest development.

Were there irregularities in the time space continuum in Queensland and Western Australia? Should I be expecting a drive-by visit from a Delorean? More importantly, should I evict the 20 Israeli backpackers from my bomb shelter? They’ve been a real cash cow through the recession.

The whole saga got me thinking about what the world of banking will be like 6 years from now so I’ve constructed a basic timeline of events:

2011 – Gail Kelly becomes a blender jockey at her local Boost Juice after getting the heave-ho from Westpac on the back of a failure to glean a single home loan application in 2010.

2012 – In a bloody coup, the two American marketing gurus in the Commonwealth Bank ads take over the bank and install basketball hoops in branches and hand out money box transformers to kids, actually making going to the bank somewhat enjoyable. This popularity springboards them ahead of the competition and they take over an ailing Westpac, re-branding themselves as ‘Compac’.

2013 - NAB forced by the Australian government, led by a Hologram of the late John Howard, to annex ANZ when a financially crippled New Zealand becomes an Australian state (South Tasmania) and the unifying moniker of National Australia Bank was deemed to suffice for both.

2014 – Compac flourish for a couple of years till they are successfully sued for billions of dollars by American computer manufacturer ‘Compaq’ for copyright infringement. Daily Telegraph headline reports that the outcome has put the ‘Bank back into bankrupt’. Daily Telegraph headline writer fired.

2015 – With ‘Compac’ in dire straits, all their concerns are taken over by NAB. NAB renamed ‘The Bank’.

2016 - Nationwide backlash to what Howard labels a “perceived lack of competition”. Financial markets crippled as investors lose faith in “The Bank” after a 0.25% Reserve Bank increase is met with a 15% rise in the mortgage rate.

Year 0 – Former ANZ upper management turned radical New Zealand nationalists hacked into the software controlling the Howard hologram, and through a series of poorly thought out foreign policy moves, make North Korea unleash three nuclear warheads. Only those of us with fallout shelters remain. We have no oil or water, but luckily I have Gail Kelly with me to make me smoothies, fruit whips and juices. And there isn’t a financial institution in sight.

I guess the apocalypse ain’t so bad after all…

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Perhaps it’s the looming prospect of a few days break or maybe a few too many cups of eggnog at the Christmas party, but the banks’ proverbial sleighs really do seem to be a few reindeer short at the moment. Westpac’s banana smoothie video is an obvious case in point, but our video parody, Westpac Bank Bananas really says it all. With little more to add to the debate I decided to cast a wider net and look at what happens when the banks get a little carried away with their ideas on customer service.

I strolled down to a Westpac ATM and, upon instructing the machine to dispense my last $20, was greeted with an additional screen asking if I wanted the personal details of the bank manager. Partly intrigued and mostly bored, I wasted no time in pressing yes. I found out that the manager, Peta Cruickshank is, amongst other things, “pulling out all the stops”, “for blitzing fees” and is “dedicated to giving me fast answers”. In need of a fast answer as to what to buy my Dad for Christmas, I decided to call Peta on her mobile number. It went straight to: “you have reached the voice mailbox of ‘private number’. Beep”. She still hasn’t got back to me. Personal touch indeed.

It seems that this strive for customer service is rearing its ugly head at every turn. A friend who works for the financial services union told me that an unnamed bank’s renewed customer service push has seen quite a few complaints from staffers. Apparently the bank calls customers at random and asks them how the service was last time they were at the bank. If the rating is under 9/10, it impacts the staff member in question’s performance review. Here’s a particularly disturbing example: a customer was attempting to withdraw money and the ATM jammed so he had to go in to the branch to sort it out. The staff were very nice and helpful, but the customer gave the bank’s customer service a ‘0′ due to the ATM inconvenience. The helpful staff member got given a ‘0′ and a mark on her customer service record despite the incident being a result of a faulty machine. Don’t you just love it when the system works?

As an aside, would anyone else who’s seen the Commonwealth Bank’s most recent TV ad actually prefer their branch to have a basketball hoop instead of a customer service promise? Customer service should be a given and a basketball hoop would be a nice way to bide the time while the old woman in front of you counts change at the teller. Speaking of which, a male colleague of mine walked into a Commonwealth branch the other day, spoke to a young female teller and upon completing the transaction was asked to rate her out of ten. Cue awkward pause. He smiled, told her “11″ and bemusedly strolled off.

Ratings out of 10? Mobile numbers? Perhaps these lonely bank managers are fostering some kind of dating scene at branch level. Christmas is a time to spend with people you love after all!

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As the clock ticks and the dust settles around Citibank’s Tuesday bombshell with the announcement of its Online Saver account, Friday looms as a landmark day in the escalating ‘Savings Account Price War’. Earlier last month, UBank issued a press release announcing a ‘rate assurance’ on its flagship USaver product, declaring that if the USaver base rate is lower than that of any of its competitors’ base or introductory rates, UBank will raise the USaver rate to match it. The assurance only lasts till the end of the year and is limited to the following products:

• ING Direct Savings Maximiser
• Bankwest TeleNet Saver
• Commonwealth Bank NetBank Saver
• Westpac eSaver
• ANZ Online Saver

Every Friday, UBank reviews the competition and makes changes as they see fit. The question is: will UBank take the bait and add the Citibank Online Saver to its list? If it does, it will be forced to match Citibank’s introductory rate of 5.5%. If it doesn’t, would UBank’s customers feel it is shirking its promise to lead the field? With the fickle high-interest savings account market largely driven by interest rates, can UBank afford to concede defeat over Citibank’s introductory period?

If Ubank fails to match the Citibank rate we could well see a raft of increasingly technologically and fiscally savvy consumers opening a Citibank Online Saver account for six months to take advantage of the higher rate and then transferring it back across to their USaver when the promotional period ends. With the ease of online money transferring and account application, this could pose a real and direct threat to the USaver.

As the adage goes, ‘you can’t win a war on a peacetime budget’, and the longer UBank fails to acknowledge the threat posed by Citibank, the greater chance it has of losing what market advantage it currently has.

So will battle lines be drawn? Keep your eye on the fireworks right here, as we bring you UBank’s response from the front lines tomorrow.

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War! That mad game the world so loves to play – Jonathan Swift

The assassination of Archduke Franz Ferdinand by Gavrilo Princip in 1914. Germany’s blitzkrieg through Poland in 1939. Coca-Cola’s launching of ‘New Coke’ in 1982. The “I’m a Mac” ad campaign launched by Apple in 2006. All sparks that lit the fuse of war, whether military, cola or computer driven.

Swift’s words have rung true once again, as Citibank today launches its new Online Saver account, and in doing so, sparking the powder keg that is the savings account market. The once stagnant savings account market has been rocked in recent months, with UBank’s high interest rate without terms or conditions setting a seemingly unassailable benchmark for the competition against the backdrop of steady Reserve Bank rate rises pushing savings rates higher and higher. Whilst Citibank’s rate is only promotional for 6 months, it does see the first savings account rate from any competitor to better what UBank’s USaver base rate has to offer.

Stay tuned as we bring you more updates from the front lines over the coming days as we run the rule over the new Citibank Online Saver and see what UBank’s response will be. Fingers crossed we don’t get caught in the crossfire.

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Being totally independent and objective, Mozo doesn’t always have nice things to say about the ‘Big Four’ banks — especially because they often pawn off their better products to subsidiaries (Commonwealth to BankWest, NAB to UBank, to name a couple). So I decided last night to start digging around and find something competitive being pushed into the marketplace by one of these big players. A few fun-filled hours ensued as I trawled their respective websites, with unnecessary fees and uncompetitive rates as far as the eye could see. Swilling the dregs of my third coffee, I resigned myself to defeat and decided to humbly retreat to the comforts of Celebrity Masterchef. I’ll just have one last quick poke around, I said to myself, then go check how many cravats Matt Preston’s wearing.

And then I stumbled on the NAB Low Rate Visa Card — hold the celebrity cook-off!

First of all, the card has a very low rate on purchases: 10.99%, one of the best on the market. A relatively low annual fee of $49, and 55 days interest fees are other nice, if not inspiring benefits. The real thing that makes this card a winner is the promotional offer: 0% on purchases and balance transfers for the first 6 months.  With Christmas looming, this card could be a real winner for those hoping to spread the festive load over half a year without having to pay any extra interest.

Plus there’s a big saving on interest payments if you transfer a balance from another card — 0% for 6 months. The one stumbling block here is what happens after these 6 months. The purchase rate reverts to 10.99%, so that’s fine. However, balance transfers revert to the cash advance rate, which is set at a not so competitive rate of 19.99%. And in another sneaky twist, you’ll have to pay off that low-interest purchases debt before you can put a dent in the higher-interest balance transfer.

This card will save you a bunch — but ONLY if you can pay everything off in 6 months.

So NAB has proved the Big 4 can actually put out a quality product that’s economical to boot. If you can pay off that balance transfer in time, this could be the card that will feather your present nest without breaking the bank. Just make sure they’re not all cravats.

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Last month Jetstar rather unexpectedly unveiled its new line of credit card, the Jetstar Mastercard. We’ve seen this before when Virgin – amid a blitz of fanfare and publicity – launched their card back in 2003. Jetstar, as we all know, run their airline on the low-cost carrier model and as such, they’ve decided to try to extend this image of affordability and price-competitiveness to their credit cards. An interest rate of 10.99% on purchases certainly does that, placing it solidly among similar cards, while the offer of 0% on balance transfers for 6 months is an attractive option for those looking to switch over — the bonus being that it reverts back to the low purchase rate rather than the significantly higher 19.99% cash advance rate of most other credit cards. The annual fee of $49 is at the lower-end too.

But here’s the thing: as far as placing itself in the ‘low rate credit card’ market goes, this card really is nothing spectacular in terms of pricing. There are cards out there with better combinations of rates and fees, such as the BankWest Lite Mastercard or even the NAB Low Rate Visa. The only real point of difference, and what we assume Jetstar is hoping will sell this product, is the ‘Jetstar Dollars’ rewards program. The addition of this program makes the Jetstar card the lowest rate credit card that offers rewards.

It makes a snappy little media soundbite, but are these rewards any good? Well, here’s how it works. You accrue ‘Jetstar dollars’ at a rate of 1 cent for every real dollar spent. As soon as you accrue $100 dollars they automatically send you a travel voucher to be used on any Jetstar flight (or if you prefer, you can request it early in increments of $25). From here on in, unlike any other flight rewards program, Jetstar really do put a gun to your head. You have to book using that voucher within 3 months, and travel within 6. You can’t accrue enough dollars to buy a flight to Hawaii or Bangkok or any other exotic destination; you’re effectively limited to $100 off your trip — or a summer holiday in Adelaide. Just what you always wanted.

They go on to boast in their press release that you can save up to $500 dollars annually on Jetstar fights. But for this to happen, you have to spend $50,000 on your card (anything over this doesn’t earn Jetstar dollars), in which case you’ll get 5 separate vouchers to be used up within those narrow timeframes. Perhaps when Qantas points become an option (mooted for mid-2010 release), we’ll take a bit more interest.

So all up, look, maybe we’re being a bit harsh on the Jetstar card. As a package it’s relatively competitive. However, when you’re making the leap from airline to credit card, they should’ve taken a leaf out of the Virgin book. When Virgin launched their credit card, it was revolutionary for the time -  no annual fee, instant rewards, a very low rate and small things like colour choices and real people on the phone. Sorry to clip your wings Jetstar, but your card is nothing special.

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UBank’s USaver, already quite the consumer champion, raised its rate by 0.35% today (effective next Tuesday), lifting it once again head and shoulders above the competition. Having sat out the last Reserve Bank rate rise, eyes were firmly aimed at the NAB-backed upstart to see whether it had perhaps conceded in its revolutionary push towards top spot in the savings account market. Alas for ING Direct and co., UBank had no such ideas, and have once again set themselves at the head of the pack.

Also of great news to existing account holders, was UBank’s rate assurance last night, declaring that until the end of the year at least, that USaver interest rate will not fall below that of their chief rivals (including introductory promotional rates), directly labelling accounts by ANZ, BankWest, Westpac, ING Direct and Commonwealth Bank as their chief competition (though surprisingly no Raboplus…).

So the time’s never been better to snap up a USaver account, once again a good 0.2% or more above its rivals. Get in quick while the rate assurances are hot I say!

Want to make up your own mind? Compare Savings Accounts on Mozo.com.au

The rise of the online savings account has been the biggest development in the savings account market over the last few years.

Characterised by a higher interest rate, low (if any) fees, set incentives and linked access to a designated transaction account, online savings accounts have quickly become the norm as the technology wave continues to push consumers’ financial management out of the bank branches and on to their desktops.

In what is a new and potentially revolutionary take on the online savings account model, UBank, NAB’s online offshoot, has launched the ‘USaver‘ account. Well, firstly it’s a market leading interest rate of 5.11% (and if you set up an automatic savings plan it goes up another 0.1%). Whereas similar online savings accounts have high introductory interest rates that last for a few months then go down to a reduced base rate, the USaver account is set to one variable rate for life. For example, say you had the Westpac equivalent, the ‘eSaver‘ account – you’d get a special introductory rate (currently 4.3%) for 4 months then it would revert back to a base rate of 2.75% for the life of the account. Not only is the bonus rate lower than UBank’s standard rate, the base rate is less than half!

Interest rates aside, the USaver is packed with handy features. Unlike many online savings accounts, there’s no need to have a linked bank account. You can transfer your money to any other Australian bank account at any time without being charged fees or getting your interest rate penalised. Moreover, you can set up multiple accounts for each savings goal within the one account.  For example, set up one account for travel savings, one for a new car, etc. Each USaver account also comes with a nifty savings tracker, which based on your interest rate and account balance can calculate the time/money required to reach your goals and display it in a snazzy graph.

What’s the catch? Well it’s a variable rate. Where other online savings accounts give you the security of knowing that you’ll at least be getting your 3%, UBank can adjust the rates as they see fit. That being said, as soon as the rates hit a low level it’s not hard to transfer your money across to that old savings account. The other main gripe I can distinguish is the lack of a linked transaction account. With most online savings accounts, you can instantly transfer your savings to your transaction account as they are with the same bank. With the USaver, you’d have to wait a day or two in processing for your savings to get across – though arguably it’s almost another tool to stop you throwing your money away on that extra round of drinks at 1am!

So all up, I’d have to say that UBank really have put out a cracker of a product. A couple of drawbacks aside, it succeeds where it matters – it’s simple to use and apply for, has a fantastic interest rate and some great innovative features. Ubeauty!

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To “pop a cap” is a common and mostly American piece of street parlance meaning to shoot someone or something. Now I’m not here to propagate the shooting of mortgage brokers or the riddling of bullet holes in your home loan agreement (as much of a thrill as it may be). What I am here to talk about is the popping of a different kind of cap. Last week, Bankwest launched Australia’s first capped home loan, the Bankwest Capped Rate Home Loan, a move which is likely to cause quite a stir in the home mortgage market.

So, what exactly is a capped home loan? Well the basic premise is this – for a fee, Bankwest are guaranteeing that the interest rate on your home loan will not go above a certain level (7.5%) until November 2011. Bankwest will first put you on a variable rate (currently at 5.4%) and if the rates go down you will pay less, but when they go up you’ll only pay up to the maximum rate. Bankwest is essentially selling ‘peace of mind’ given RBA increases are now a reality and the inevitable recovery of world economies after the global financial crisis.

It sounds like a no-brainer – competitive rate, a guarantee on rates for 3 years all for a nominal fee  - or so Bankwest would have you believe. What’s the catch you say? First off, you’re paying more than you would for a normal loan in fees. To get the cap, you have to fork out a fee (0.15% of the loan amount). If you’re borrowing $250,000 for example, this fee totals $375. Moreover, unlike any other variable rate loan by Bankwest, the exit fees for leaving is set at 1% of the loan outstanding at the time of exit – quite a sizeable amount if you’re only 2 years into paying off a loan of that size.

The real deal breaker in the whole equation however is the capped rate. Is it worth paying the extra fees to safeguard against interest rates going above 7.5%? Will rate rises go above and beyond the 2.1% needed to make the cap effective? Only time will tell, but it is a lot of interest rate rises in just 3 years. Moreover, if you are worried by rising interest rates perhaps you would derive more security in fixing all or part of your loan? Bankwest’s 3 year fixed rate is a good 40 basis points lower than the cap’s upper limit.

Despite the potential drawbacks, this home loan product could be heralded as the opening salvo of what is sure to be an intriguing period in the Australian home loan market as interest rates begin to rise. What will be interesting is to see how the market, particularly, the ‘Big Four Banks’, respond to Bankwest’s initiative. Watch this space, as there’s sure to be plenty more shots fired in the coming months.

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