St George offers $50,000 in switching costs to new business customers as banking war heats up

The business banking war has intensified, with St George now announcing an offer to pay up to $50,000 to businesses in order to help pay switching costs, as it attempts to improve its lending reputation among corporate customers.

But one banking expert says there is not much evidence to suggest these types of incentives actually attract new customers.

“The switching intentions between the banks have not actually moved that much. If you go back the last six months, the current movement in the business market didn’t take traction until interest rates started going up in November,” DBM managing director Dhruba Gupta says.

“It’s more likely that the talk around reducing costs for switching is based on the demand for personal products, rather than business.”

The St George offer will allow customers who move their business and transaction accounts by July 31 to receive up to 0.5% of that total amount financed, with a cap of $50,000. That money will be used to cover the costs of switching, including valuation fees, legal costs, stamp duty and discharge fees.

Eligible businesses must apply for new business finance of $50,000 or more before July 31, and open a primary business account. That finance needs to be settled by September 30, and be current for three years.

St George chief operating officer Andrew Moore told the Australian Financial Review while the offer will be suitable for large corporates, SMEs will be able to apply for the offer as well.

“We are looking to acquire new customers, which is a bit of a change from the approach at St George over the last few years, which have been dominated by the merger with Westpac and the global financial crisis.”

“Realistically at that $50,000 level, you are talking about larger corporate customers, but the switching opportunity is available to small and medium enterprises as well.”

The move comes as Westpac plans to move the St George brand out of Victoria, replacing it with the Bank of Melbourne name. It also comes as its lending has dropped over the past year, with the bank adjusting to a new management structure.

But the development also comes alongside a major change in banking overall, with more focus on competition. As exit fees are abolished for both business and personal customers, banks are scrambling for market share – even NAB is pumping millions into its post-exit fees era marketing campaign.

Gubta says the market is clearly shifting towards the smaller brands, such as St George, and they are clearly attempting to capitalise on that reputation.

“What we are seeing is that the gap between the smaller banks, including the St George, Bendigo and HSBC brands, and the larger banks is growing.”

“The satisfaction ratings of the major banks have stayed more or less the same, whereas the smaller banks have been moving ahead. So the fact St George is coming on board with such an aggressive offer such as this is interesting.”

But Gubta says that until businesses start feeling excessive pressure, they may not be convinced by such incentives.

“If they can see some direct impact which turns up on their banking statements, or affects their ability to borrow or pay back loans, that’s when they start reacting. But general reaction in the media and so on, it doesn’t really seem to move the numbers that much.”