Hard road for bank predicted

By RICHARD BRADDELL

NZ Post may struggle to get its targeted 100,000 customers in three years for its planned People's Bank, and could end up with a customer base of older or lower income people.

Dr Mark Colgate, a senior lecturer in marketing who organises the University of Auckland's banking survey, said that capturing a 3 to 4 per cent market share would not be easy, even though his research had found 54 per cent of people sympathetic to the bank's concept.

To achieve its target, NZ Post would have to attract between a quarter to a third of the 150,000 or so bank customers who switch each year, he said.

"They will have to work hard and do some very good marketing."

Industry sources joined Dr Colgate in saying that there would be a wide range of usage patterns among NZ Post's targeted 100,000 customers and many may not use it as their main bank.

But NZ Post's chief executive, Elmer Toime, said that would not matter because its budget was based on a customer base representative of the wider industry.

Dr Colgate said that the People's Bank was most popular among the over fifties, perhaps out of nostalgia for the old Post Bank, and among those dissatisfied with their existing banks.

The bank would also battle to attract higher income customers - who his research showed were much less likely to change banks and were much less interested in fees.

NZ Post said that its business principle was "customer service at the lowest cost and lowest price" and it would offer simple services at fees 20 to 30 per cent lower than the major banks.

But lower fees were of greatest importance to lower income customers, Dr Colgate said.

"The market they are going for is those people who are really interested in fees and charges but once you get past a certain level of sophistication in terms of credit cards and mortgages, fees and charges become relatively irrelevant," he said.

"It's other things like negotiation of loans and convenience and internet banking and telephone banking. I think People's Bank in that respect is going to be inferior."

ANZ and Westpac Trust, the banks which fared worst in the university's customer satisfaction surveys, were the banks whose customers were most likely to defect.

While some bankers had argued that the People's Bank would become the dumping ground for unprofitable customers, Dr Colgate said the big banks would still be reluctant to lose them because they helped to lower fixed costs.

With $80 million seed capital to be provided by the Government, the bank could be the size of Taranaki's TSB which has $1.25 billion in assets and about 80,000 customers.

TSB's managing director, Kevin Rimmington, said it had taken 150 years for his bank to reach its size.

He said the People's Bank's future would depend on the services offered.

Neither TSB nor NZ Post have indicated how agency arrangements between the two will be affected once the People's Bank is launched.