CommBank has signalled an end to its $2,000 cashback offer bowing to investor pressure amid a forecasted slowdown in new lending.
Speaking to the Savings Tip Jar podcast, WLTH Co-founder and CEO Brodie Haupt said cashback offers are a lazy way for the major banks to gain customers.
“Major banks are failing to understand their unit economics around the cost of acquisition for a customer,” Mr Haupt said.
“So rather than trying to generate and invest in education for their borrowers and customers, they look for retention.
“CBA is really guilty of this - they don't want to lose them and they know that their customer acquisition cost is higher than that than the unit economic cost per settled loan.”
NAB’s digital brand Ubank scrapped its cashback offer, once as high as $5,000, in April.
Major banks may be winding down their cashback offers as the effects of the RBA’s Term Funding Facility (TFF) wears off and they have to repay their allocation amid an expensive market for wholesale funding.
The TFF was announced in March 2020 as part of the RBA’s response to the economic fallout from COVID-19. It provides a large amount of funding to banks at a very low-interest rate to be repaid over three years.
Given about $200 billion of the RBA’s TFF is due for repayment before mid-2024 (CBA has $50 billion to repay), mortgage incentives will likely start to disappear.
While cashback offers can be a nice hit to the hip pocket for borrowers, they can distort the market and hide the true cost of a loan.
A competitive interest rate will typically trump a one-off perk, particularly on larger loans.
So before you consider switching banks for the sole reason of getting a quick cash bonus, read the fine print and do the maths.
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