Banks need to understand savers better

Banks are living in the past when it comes to the way they segment their customers, according to Westpac's chief strategy officer Jon Nicholson.

Speaking at the Australian Retail Deposits conference in Sydney yesterday, Nicholson said segmentation had traditionally focused on how customers borrowed but banks didn't know enough about how customers saved.

As the industry worked through the aftershocks of the global financial crisis, Nicholson said banks needed to spend a lot more time understanding the economics of deposits and savings behaviour.

"I don't think we really understand those as well as we might," he said.

Nicholson said the war for deposits would continue for some time and banks would have to change their culture to focus more on that part of their operations. We have tended to look at savings as a balance sheet item.

"I think people will come much more to realise that their liabilities are poorly named and that actually being custodian of people's savings and their investments is a very, very valuable thing," he said.

He said this could mean a greater focus on segments like retirees and young people saving for their first home which, until now, had been undervalued.

"The segmentations we have now are really directed for the decades behind us, not the decades ahead," Nicholson said.