Banks exposed: Small businesses treated as second-class customers

Small businesses are being treated as second-class customers by Australian banking providers, according to new research by independent finance comparison website Mozo.com.au.

Mozo.com.au this month launched Australia’s first comprehensive business banking comparison service, in response to demand from small business owners who already use Mozo’s personal banking comparison tools but wanted help comparing business banking options.

Mozo Director Kirsty Lamont said, “We were shocked when we discovered just how badly small business customers are being treated by the banking industry. There is a huge disparity between the interest rates and conditions on offer to personal customers versus business customers.

“For instance personal savers get first-class treatment with high interest rates, no conditions and bonus rates to sweeten the deal. Businesses are very much second-class savers, treated to lower rates and what can only be described as punitive and senseless conditions.”

Mozo’s research reveals an average 0.56% difference between the best interest rates on offer to personal savings account customers versus business savings account customers[1]. Making matters worse, all of the Big Four Banks and a handful of others impose tiered rates on business savers where balances under a certain level earn no interest at all.

Nearly half of the banks surveyed, including NAB, Westpac, St George, BankWest and Citibank, offer bonus interest rates to personal customers but not to business customers. Standard rates are also often lower for business customers. RaboDirect for instance offers personal savers a 6.50% bonus rate and a 6.00% standard rate, while business customers receive a bonus rate of just 5.60% and a standard rate of 5.10%.

Ms Lamont said, “Our researchers found that not all banks treat businesses as second-class customers. By bringing some much needed transparency to the business banking market, we hope we can help small business owners find banking providers who will reward, rather than penalise, them for their business.”

For instance, savings account market-leader ING Direct offers the same competitive rates to both its business and personal customers (5.00% standard rate, with a bonus of 6.25% for six months for business customers and 6.35% for four months for personal customers). ME Bank offers a condition-free, ongoing rate of 5.60% to both business and personal savers.

“Ultimately, it’s up to small businesses to put an end to bank discrimination by voting with their feet”, Ms Lamont said.

“There’s no reason why you can’t have a loan with one bank, and a credit card and savings account with other providers. If your bank insists on treating you like a second-class customer, go out and get better rates by cherry-picking the best products on offer elsewhere.”

Mozo’s free business banking comparison service helps businesses compare loans, savings accounts, term deposits, credit cards and transaction accounts from 29 business banking providers, including the major banks, regional banks, credit unions and building societies.