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Make the switch in 2010

Make the switch in 2010 – Sick of paying through the nose for bad service from banks and telcos? Then make 2010 the year you find a better deal. Stephen Craft uncovers some shortcuts to help you make the switch.

It’s official: Australian businesses are fed up with the big banks. They’re also reporting more problems with big business service providers like insurance and telecommunication companies. Yet many small business owners are surprisingly reluctant to switch to a better deal.

The October 2009 East & Partners Business Banking Customer Satisfaction Monitor measured customer satisfaction at just 4.79 out of 10, down from 5.50 a year earlier, with the big four banks scoring worst. At the same time, the proportion of businesses planning to change banks halved to just 16.5%.

That confirms the findings from a broader banking satisfaction survey by consumer advocacy group CHOICE.

“We generally churn between banks half as much as the UK and half as much as in Europe,” says Christopher Zinn, CHOICE media spokesperson. “Really, people are rusted on to the big four banks.”

Meanwhile, the Financial Ombudsman Service recorded a 42.5% rise in small business and farm insurance disputes last financial year. And complaints to the Telecommunications Industry Ombudsman from small businesses and consumers rose by an incredible 54%, a result that the Communications Minister, Stephen Conroy, called an “absolute shocker”.

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So what’s stopping us from switching? And what can you do to make the process easier?

Hurdle 1: All big companies are the same

The hurdle: Perhaps the biggest barrier is simply the perception that all providers are the same, so there’s little point in changing.

“There’s no doubt that there’s a reluctance to switch because people think it’s out of the frying pan into the fire,” says Zinn.

Yet he argues that there are good alternatives, if only you take the time to look for them.

Surveys have consistently shown higher satisfaction levels for regional banks, credit unions and building societies, while the growth of online banking has made it much easier to do business with smaller institutions that lack the extensive branch network of the big banks.

“Banking isn’t just about the cost,” says Zinn.

“It’s also the relationship and how much you can rely on them to get things done or fix things when they don’t work.”

With insurance, CHOICE has found big differences in the prices quoted by different insurers for the same cover. And online comparison tools have made it easier than ever to compare alternatives and get multiple quotes without leaving your desk. But you do need to be cautious about sites that accept commissions from the providers whose products they rate, or who only cover selected providers.

The shortcut: Go online to find the best deal. Table 1 shows some popular comparison and rating sites:

Hurdle 2: The hassle

The hurdle: Changing providers can be time-consuming, especially if you have multiple products with the same company. For example, switching your main business banking account means updating or re-creating scheduled payments (such as wages), direct debits (such as utility payments) and direct credits from customers. In 2008, the Federal Government introduced a switching package requiring banks to provide more information to simplify the process – but according to Zinn, they could do more.

“We do not feel that it actually goes far enough,” he says. “An indication of that is how few people have used it.”

However, you need to balance the inconvenience against the potential savings.

“These things can be tiresome, but the payback period for those few hours you might spend is usually quite short.”

The shortcut: Make the most of the Government switching package. See Table, below

If you use online banking, you may also be able to export payment data into a file that you can then import into your new online banking service. Ask your bank for details.

Hurdle 3: Complexity

The hurdle: Nowadays, financial products and phone plans are packed with features, terms and conditions that can make it difficult to compare like with like – or even work out exactly what you’re paying for.

“Some of the language used is confusing,” says Zinn. “A cynic might say it’s deliberately confusing.”

Take the term capped, for example. “Plenty of people have got significant bill shocks by finding out that their cap is what the telcos call a ‘soft cap’, which means that just part of the business is capped, while the other parts aren’t,” he says.

The result is what Dilbert creator Scott Adams popularly dubbed a confusopoly where, like Zinn says, “you make things so confusing for the customer that they don’t switch or move because they really can’t make an informed choice.”
The solution is to know what you are looking for, then take the time to research the alternatives.

The shortcut: When you’re choosing a complex product like a bundled telecommunications solution, it can be worth consulting an independent adviser who can cut through the complexity. You may
also find some independent information online.

Making the switch

Step 1: Set your priorities. What’s most important to you: cost, reliability, service? Do you really need to earn interest on your transaction account, or is it better to save on fees? By deciding up front what you’re looking for, you can simplify the process enormously.

Step 2: Do your research. Go online – or better yet, delegate a staff member to do it for you. Where possible, quantify the savings so you can make a more informed decision.

Step 3: Negotiate the deal. Now take the results of that research to your current provider and one or two alternatives. Ask them what they’re willing to do to win your business. The answer might surprise you -you might even be spared the inconvenience of switching.

Step 4: Make the switch. If you’ve found a better deal elsewhere, now it’s time to make the switch. Ensure you’ve got everything you need from your existing provider before you shut down your relationship with them. For example, you can only transfer an active phone number, so make sure the transfer happens before you cancel your existing service.

Five things big companies don’t want you to know

  1. Most banks can negotiate a better rate or a fee waiver, particularly if you are bringing them a significant chunk of business. The published rate is only the starting point
  2. There can be big variations in the amount quoted by different insurance companies for policies that are essentially identical – even relatively straightforward policies like compulsory third party vehicle cover
  3. It’s usually easier to upgrade than downgrade. So if you’re not sure which mobile or broadband plan to choose, go low, then upgrade if you need to.
  4. Providers often offer a discount for prepayments – but those discounts may not be all that they seem. Money paid today is worth more than money paid next year, because they can earn (or save) interest on it in the meantime. (Economists call that the time value of money.) So, if you’re paying upfront, make sure you’re getting real savings.
  5. New technologies like VOIP could help you make huge savings on telecommunications – and they’re improving all the time. 

Table 1: Comparison and rating sites

Table 2: Switching bank accounts

Table 3: Independent information

You can also find an increasing amount of information online:

Case Study: Slashing costs with VOIP

When online broker Bell Direct chose VOIP for their new phone system, they slashed set-up costs by up to 90%. But cost savings weren’t the only benefit.

“With a VOIP solution … it’s actually quite easy to get one of our own in-house developers to make changes,” says Lee Muco, chief operating officer. “So we can say ‘if a call is of this type, then route it to this particular office, and if it’s been waiting longer than 30 seconds, then route it to this particular agent’. That’s the level of flexibility and control you can have.”

With a data centre in Melbourne and staff in Sydney, Perth and Kuala Lumpur, flexibility was essential.

“Using VOIP, it means we can easily have calls answered in any one of those three offices – in Perth, Sydney or KL,” says Muco. “That really aids our whole disaster recovery set-up. If something happens and our Sydney office is offline, Perth can pick up the slack very quickly.”

The system is powered by Bell Direct’s existing IT infrastructure, running largely open-source software. Just replacing traditional call centre handsets with a softphone and a computer headset meant significant cost savings.

“That saves $500 on the handset straight away,” says Muco. “So if you have a call centre with 20 staff, you’ve saved $10,000 straight away.”

Despite some teething issues with bandwidth, Muco says that call quality is high and constantly improving. However, he does acknowledge that you need to do your homework. “It does pay to have some people in the organisation who are a little tech-savvy.” #

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