The share of bank customers seriously considering dumping their lender for a rival has nearly doubled in the last year, a new survey says, underlining the continuing pressure on bank revenues from competition.
A survey by investment bank UBS found the proportion of customers who were "seriously considering" switching to a rival bank rose to 12 per cent, up from 7 per cent last year.
While banks are investing heavily in mobile banking apps as a way to retain their customers, the survey of 1,150 people said the most important factors that convinced people to change banks were fees and interest rates.
Poor service was the next top reason, but the quality of mobile banking services was relatively unimportant in influencing decisions to switch.
The survey also underlined the shift towards banking on smart phones, with fewer customers saying they used a bank branch, ATM or desktop online banking website every week.
Home loan battle
The home loan market is currently a key competitive battle ground between banks, with lenders pressured to cut their mortgage rates in order to win customers. UBS analyst Jonathan Mott said this fierce competition would continue, putting more pressure on banks' revenue.
"Our survey indicates competitive forces are unlikely to subside, with customers increasingly likely to switch banks based on price," Mr Mott said.
"Despite comments from management that they will reduce the use of price incentives to stabilise share, this appears to be wishful thinking."
The increase in customers open to switching occurred across all of the big four: ANZ Bank Commonwealth Bank, Westpac, and National Australia Bank.
The trend may be driven by more people experimenting with "fintech" businesses, the growing use of mortgage brokers, and move by banks to introduce different interest rates for property investors and owner-occupiers over the past year, Mr Mott said.
Household indebtedness has also lifted to a record high, which makes borrowers more sensitive to interest rates.
Latest profit results from CBA, NAB and ANZ all showed lenders profit margins were being squeezed - and a likely reason for this is stiff competition in the mortgage market, where lenders are frequently offering new customers 1.4 percentage point discounts off their standard variable interest rates.
Encouraging more customers to consider switching banks has been a key aim of policymakers keen to boost competition in banking.
In the United Kingdom, the competition watchdog this monthunveiled a plan to make it easier for consumers to find a better deal through mobile banking apps, which may pressure banks to offer more attractive interest rates and lower fees.
The Gillard government in 2012 also introduced a system that allows customers to change transaction accounts by filling out a single form, as part of a banking competition package.
However, customers have historically proven reluctant to switch, in part because of the hassle of changing direct debit arrangements.