ASIC is a failed agency that instead of holding the banks accountable has let them get off scot-free.
I asked questions about fees for no service at estimates and wasn’t reassured.
Posts
I’m concerned about the increasing influence of large, predatory merchant banks on the Australian economy. You’ve heard the names mentioned — Blackrock, First State, State Street, Vanguard and Norges. While their shareholdings may be small, typically 5 – 8% each, when they act together these shareholdings amount to a controlling interest over targeted industries.
These include our retailing duopoly, Coles and Woolworths and our Big-4 banks: Commonwealth, ANZ, NAB and Westpac/St George.
I asked the Australian Competition and Consumer Commission (ACCC) about the way that our banking sector behave like a monopoly — one set of owners with multiple logos. The answers were encouraging but the ACCC needs more power to control these predatory merchant banks.
I also asked about de-banking, which is the process that the Big-4 use their market power to harm or close businesses that compete with them, including cryto exchanges and bullion dealers. The biggest competitor of all though, is actually cash. Physical money competes with more traceable and profitable electronic banking. Banks are closing branches, pulling out ATMs and generally trying to engineer a cash-free society for their profit and control.
These questions were my first to ACCC in quite some time. The answers were sharp and well informed and I look forward to developing these lines of inquiry next estimates.
Transcript
CHAIR: Senator Roberts.
Senator ROBERTS: We don’t call the ACCC very often because it seems you do a very good job. To improve banking competition—and that’s needed—do we need more regulation or more independent banks providing competition? Which is it?
Ms Cass-Gottlieb: We want both.
Senator ROBERTS: Okay! The ACCC refused permission for ANZ to acquire Suncorp bank on competition grounds?
Ms Cass-Gottlieb: We did.
Senator ROBERTS: That was a very good decision. Would it improve competition in Australian banking if Suncorp was now purchased by a third party not currently involved in banking?
Ms Cass-Gottlieb: Firstly, I should note that ANZ and Suncorp have taken an action for review in the tribunal and that decision will come down next week, and so we await that decision. It may or may not be the same decision as the ACCC’s. However, our decision reflected that we were not satisfied that there would not be a substantial lessening of competition and either Suncorp continuing independent, as it is now, or being acquired by another party—one of the possible alternative transactions that was identified was, for instance, merger with an alternative regional bank or smaller bank—or by a party that is not currently a participant in the banking sector, would each retain the independent, competitive constraint.
Senator ROBERTS: In your progress report on the digital platform services inquiry, you made the point that the ACCC continues to recommend the introduction of new and expanded industry-wide consumer measures, including prohibition on unfair trading practices. What industries or perhaps what context informed that request for more power?
Ms Cass-Gottlieb: The ACCC is looking for that reform across the economy. We do see that, in terms of digital platforms—for instance, in online trading, subscription traps are a good example—there is a significant capacity to have unfair practices and processes that deprive consumers of the ability to make informed choices. But we do see these problems across the economy. The government is proceeding through a consultation process, which will conclude in November of this year, and we hope this will result in the introduction of an unfair trading practices prohibition across the economy.
Senator ROBERTS: As to PEXA—I think they’re the conveyancing people?
Ms Cass-Gottlieb: Yes.
Senator ROBERTS: Would PEXA’s near-monopoly in electronic conveyancing be an area where you would like more power to keep an eye on their use of market power?
Ms Cass-Gottlieb: We are hopeful that ARNECC, which is the current regulator, will be in a position to require compliance with the steps towards interoperability, which had been hoped for and planned, so that there will be a capacity to result in meaningful competition.
Senator ROBERTS: You approved the merger of the Armaguard and Prosegur cash handling businesses—against opposition from the free market, which fears losing the ability to negotiate on price—with the justification of keeping these businesses going. Are you confident the merged entity is viable and capable of holding 90 per cent of the Australian market long-term—let’s say, up to 2030?
Ms Cass-Gottlieb: It is correct that we did approve that merger on condition of an undertaking. We were particularly conscious of the matters that were put before us relating to the loss of viability for two competing providers of cash-in-transit services, as there was such a significant decrease in the use of cash, particularly brought on during the period of COVID. Under that undertaking, which is effective for three years, the merged entity is required to continue to offer the services to all locations that are currently serviced. It also limits the ability to reduce service levels and raise prices. We do monitor compliance with all undertakings we accept. We do know that the merged entity states that there have been further changes that call into question its continued viability. We have granted an interim authorisation that was sought by 20 members of the Australian Banking Association, the Reserve Bank of Australia, Treasury, Australia Post and suppliers of cash-in-transit services—a whole set—that were seeking to be able to negotiate to try to reach a resolution for continued cash-in-transit services on acceptable terms. As a condition of that interim authorisation, we required that there be public reports monthly in relation to the discussions, because it was quite a significant authorisation that we enabled for those negotiations. We have just this week received the first report, and it’s available on our register.
Senator ROBERTS: Banks are refusing to accept or issue cash to profitable small players like Commander Security. This company has been de-banked by the big four and now even a customer owned bank. Banks are closing branches, pulling out ATMs and refusing to give cash to their own customers in a situation where identity and use of cash has been established. Cash is, in effect, a competitor to the bank’s dream and the customer’s nightmare of making a fee on every transaction and service every person makes. Are banks misusing their market power to eliminate cash as a competitor to their own electronic payment systems and drive customers to fee-paying services? That’s what it appears to be.
Ms Cass-Gottlieb: We do currently have a misuse of market power action relating to financial services in the court against MasterCard. We certainly look closely at misuse of market power questions in relation to financial services. There are a series of complex questions in there, including on the closure of branches, which APRA does monitor and report on. We have also reported on our concerns in relation to the manner in which there is muted competition between the banks—for instance, in relation to retail deposit products—and sought recommended regulation that will better inform customers so they can better exercise choice in the products that they acquire. It is difficult to separate what changes are occurring commercially because of the changes in the economy—
Senator ROBERTS: Yes, it is difficult to know who’s the horse and who’s the cart.
Ms Cass-Gottlieb: Exactly—what the boundaries are. But we do look at all these questions very carefully, both in terms of enforcement and in terms of monitoring, and we are hoping to continue financial services monitoring because we think they are essential services for Australian families.
Senator ROBERTS: Are you aware of the Senate inquiry into the closure of rural bank branches?
Ms Cass-Gottlieb: Yes, we are.
Senator ROBERTS: It seems quite clear from the one that I’ve taken part in that it’s the banks driving the reduction in cash. It seems very clear to us, but, anyway, that’s a matter for you. Banks are refusing to provide banking services to their customers. It’s not just private cash handling companies; it’s bullion dealers and legitimate cryptocurrencies being de-banked. Last week, Bankwest limited how much their customers could spend on buying crypto. Is this another case of the banks misusing their market power to harm the operation of a competitor, and is it worthy of your scrutiny?
Ms Cass-Gottlieb: The ACCC participated in a working group and taskforce, together with APRA, the Reserve Bank, AUSTRAC and Treasury, with a concern about de-banking. One of the recommendations from that was that there needs to be better data collection, to be able to better measure and monitor the pattern of and conduct in de-banking, and also that there needs to be more clarity in terms of the anti-money-laundering and counterterrorism financing requirements, which are bases upon which banks say that they need to make risk assessments and, at times, de-bank. So there was a desire to try to reduce that conduct.
CHAIR: This is your last question.
Senator ROBERTS: Something that few people seem to be aware of—I’m guessing you are aware of that—is that the major banks, the big four banks, would seem to be one bank with four logos. I say that because their services are similar, their strategies are similar and their modes of operating are similar. They’re largely owned, as I said, by super funds who don’t take an active interest and by mums and dads who don’t take an active interest. That leaves a controlling interest in the hands of four or five major, predatory global companies: BlackRock, Vanguard, State Street, First State and one other. They control, it seems, the big four banks. The banks have enormous power here. They have enormous legal power. They’ve got deep pockets to hire the best lawyers. They’ve got complex regulations that they can hide behind and with which they can really beat up on an individual. They’ve got enormous market power. I think they have 90 per cent of the cash deposits. They have enormous financial power, and, as I said, they hide behind regulations.
CHAIR: This is a very long last question, Senator Roberts.
Senator ROBERTS: Is there any thought of giving scrutiny or understanding to the companies that I mentioned—BlackRock, Vanguard, State Street, First State—and their influence over each of the big four banks that they control?
Ms Cass-Gottlieb: We’ve certainly been contemplating the benefits of continued monitoring, particularly in relation to key services that the banks provide. Also, a part of the Suncorp-ANZ decision looked at concerns in terms of the capacity of the major banks with very similar business models to engage in a problem of what is called ‘concerted effects’. In effect, their responses to competitive signals are similar because of their similar structures. So we are conscious of those risks, and we do seek, both through monitoring and through powers that we have in relation to concerted practices, to watch carefully for these sorts of concerns.
Senator ROBERTS: We do know that BlackRock, Vanguard and State Street control a lot of major companies around the world and control a lot of companies and a lot of industries.
CHAIR: Thank you, Senator Roberts.
Senator ROBERTS: Thank you.
Recently, supervision of the Banking Code of Practice moved from the Australian Prudential Regulation Authority (APRA) to the Australian Securities and Investments Commission (ASIC), who have initiated a thorough review of the code. This first draft of the new code has many shortcomings, and I asked about these. From their answers, it is clear that ASIC are across the shortcomings in the code and I felt they are serious about making the new code a better document that provides stronger protections for customers. A lot of protests have quite rightly occurred around the closure of bank branches.
The truth is that banks are allowed to do that because the banking code contains no provision requiring the banks to provide face to face banking. Also missing from the new code is a guarantee of access to cash and a guarantee of banking services. Currently banks are de-banking competitors like bullion dealers and crypto exchanges. They are also closing bank branches and ATMs to reduce access to cash which they can’t easily monitor or control.
I was encouraged by the answers from Deputy Chair, Sarah Court of ASIC and I look forward to the next draft of the 2024 Banking Code of Practice. Bank customers deserve better protections than APRA have provided in recent years.
Transcript
Senator ROBERTS: Can I start by confirming our meeting will occur on 19 March on the subject of the security of companies offering bullion storage and sales services in Australia.
Ms Court : That’s right.
Senator ROBERTS: I look forward to that. Total compensation for the ‘fee for no service’ scandal was $4.7 billion. Since those compensation payments, do you believe financial institutions have fixed their systems and this practice is no longer happening?
Mr Longo : I’ll ask Deputy Chair Court to comment on that. I think it’s a truism that systems and processes of the banks are always in need of improvement and enhancement, so one can never be certain that those systems will be fixed forever. We certainly think a lot of progress has been made coming out of the royal commission. I know Deputy Chair Court has done some work in this area as well.
Ms Court : I don’t think I’d ever presume to say that the issues of fees for no service or the compliance and legacy systems of large financial institutions have been completely fixed. I think there’s been progress made. As you say, there have been billions of dollars of remediation. There have also been multimillion-dollar penalties applied by courts in relation to that conduct. We continue to have cases where fees for no service are being alleged, and we are continuing to investigate them and take court action where it’s appropriate.
Senator ROBERTS: That’s pleasing. Do you think the amount of compensation, $4.7 billion, met or exceeded the revenue that was illegally obtained by financial institutions for the ‘fee for no service’ scam?
Ms Court : I think you’d have to ask that question of those institutions. The remediation figure is eye watering.
Senator ROBERTS: I will turn now to the new mandatory Banking Code of Practice that ASIC will consider recommending to the minister. The Australian Banking Association, led by former Labor premier Anna Bligh, has extended coverage to include buy-now pay-later providers by including them in the phrase, ‘Each bank will exercise the care and skill of a diligent and prudent banker.’ Does that phrase provide a quantifiable legal protection to customers, or is it utterly meaningless?
Ms O’Rourke : I’m happy to assist in relation to the banking code. I might just clarify. In your introduction, you referred to it as a mandatory code, and you also referred to it being taken to the minister. Industry codes aren’t mandatory. You’re right that the banking industry has developed one. The approval process is also one that, if chosen by the industry association, comes to ASIC. It’s an ASIC approval process, not a ministerial one.
If I come to your particular question about the terms of the code, the code that exists now commenced in 2018. I think, as you’re alluding to, the Australian Banking Association, who wrote the code, and its members, who signed up to it, have been going through a process of updating the code and have proposed to bring it to ASIC for additional approval—for approval under the statutory scheme. One of the issues that are live in that process is the question of the inclusion of the phrase ‘prudent and diligent banker’, which you’ve called out. In the existing code, the one that exists now that was approved in 2018—and there have been some revisions approved since—that phrase is included. In the proposed code, the draft code that’s been prepared, there’s a question about whether it can come out on the basis that it’s duplicative of the responsible lending obligations that already apply to bankers. So that’s the issue.
As to its progress, I’ll give you some further information. The ABA had done a consultation process to develop the draft code. We now, at ASIC, are doing a consultation process associated with our consideration of approving it because of the importance of these codes to all banking consumers—all Australians. These codes really matter, and making sure that they are suitable in their content and meet the statutory requirements is something we take very seriously. We are undertaking a consultation process. That particular question is one of the ones we’re seeking submissions on and very carefully considering.
Senator ROBERTS: I think I’ll be coming back to that, Ms O’Rourke. I’ll move quickly because the chair’s needing to hurry.
CHAIR: I’m staring at you, Senator Roberts, but thank you for proceeding quickly.
Senator ROBERTS: I raised the fee for no service earlier for a reason. The clause in the proposed Australian Banking Association code, chapter 12, No. 31, used to read that the bank ‘will make sure we have your agreement’ on charging a fee for a new service. That clause has been removed from the new code, meaning the bank does not need to get a customer’s permission before charging them a fee for a new service. If a bank doesn’t get my permission, under the new code can they simply start charging me for services that I did not agree to or may not know I’m being charged for? Are they unwinding your good work on the fee for no service?
Ms O’Rourke : I’m not particularly aware of that proposed deletion. I think I might take on notice any background relevant to that. The general answer is that there are provisions widely in the code that would be relevant to whether fees for no service can be charged, and indeed I think my colleagues have spoken to the important work ASIC has taken to ensure that that sort of activity does not occur.
Senator ROBERTS: Can you show me in the draft code where it provides a guarantee of face-to-face banking services that means access to a bank branch?
Ms O’Rourke : I think that in both the existing code and proposed code the question around branch closures, which is what I think you’re alluding to, is covered by reference to a protocol that exists about the provisions that a bank will consider on decisions as to whether or not it provides banking services in particular communities. It’s not framed, as far as I’m aware, in the way that you’ve framed it: as a right. I can’t point to that, if that’s what you’re seeking.
Senator ROBERTS: Debanking is proving to be a real problem across businesses that are alternatives to the bank system. Banks are debanking bullion dealers, crypto brokers and third-party cash transit companies. Is there anything in this code of practice that guarantees banking services for customers who use cash, bullion or cryptocurrency?
Ms O’Rourke : I’m going to have to take that on notice.
Senator ROBERTS: Is there anything in this draft that guarantees access to the King’s currency—cash?
Ms O’Rourke : Not that I’m aware of, but I’m happy to take it on notice.
Senator ROBERTS: Can you show me where it says something like, ‘We undertake to not terminate your banking services for your political views unless a criminal conviction has resulted,’ or similar? As written, the code gives no protection for a customer who exhibits wrongthink on social media, for instance. This is a problem.
Ms O’Rourke : I think that’s a statement.
CHAIR: Last question, thank you, Senator Roberts.
Senator ROBERTS: Why is the sentence, ‘We will engage with you in a fair, reasonable and ethical manner,’ being replaced with ‘efficient, honest and fair’? Is there no room for ethics in modern banking, and is the term ‘efficiency’ used so that the bank can say it’s not efficient for them?
Ms O’Rourke : I think you’re right to point out that that’s one of the important distinctions between the existing code and the proposed one, and therefore it’s one of the areas that we are consulting on to understand stakeholders’ views on that proposed change. I’m agreeing with you that it’s an important issue for us to explore to understand the basis for the proposed change and what the consequences would be.
Senator ROBERTS: Are you aware that the Consumer Action Law Centre describes the new code as offering no overall improvements in consumer protection? Do you, ASIC, agree with this characterisation, and will ASIC add extra protections yourself before forwarding the code?
Ms O’Rourke : As I referred to, we’re right in the middle of a consultation process which includes listening to stakeholders about their perspectives on the new code. We’re taking careful consideration of all the issues that are raised before we move to the decision point that I described earlier.
Senator ROBERTS: Thank you. I must say that I appreciate the direct and immediate answers.
The ACCC ruled last year that allowing ANZ to buy Suncorp would reduce banking competition. Today, the Australian Competition Tribunal disagreed and allowed the merger.
The Tribunal’s decision is a wasted opportunity when Suncorp should have been bought and turned into a People’s Bank. There is some logic to the Tribunal’s decision. Australian banks are, at best, a cartel and at worst, a monopoly – one bank with many logos. In short, there must be competition before that competition can be lessened. Our banks do not compete – they work together.
This is a result of the same foreign merchant banks holding controlling shareholdings in all of Australia’s major banks. In turn, the banks behave in exactly the same way, offering almost identical risk management, products, fees and charges.
Banks are working in collusion to close bank branches and eliminate cash, to force everyday Australian consumers into more electronic banking services, from which banks profit.
Banks are acting together to de-bank competitors like crypto exchanges and bullion dealers, using their market power to squash their competitors. The result is obscene profits ($35 billion last year), much of which is sent as dividends to foreign merchant banks.
This is what the Tribunal has decided is an acceptable way to run banking in Australia.
Last year I proposed using the Future Fund to buy Suncorp for their asking price of $5 billion and then turn it into a people’s bank, one that would operate with their customers’ interests at heart, in a fair, ethical and honest manner.
One Nation will continue to campaign for a people’s bank and I call on Treasurer Jim Chalmers to use his powers to direct the ACCC to investigate collusion, common ownership and restrictive trade practices being conducted by the Big 4 banks.
It’s time to force real competition between the banks and establish a People’s Bank.
Very few in the media acknowledge the Reserve Bank creating $500 billion out of thin air is a major cause of inflation.
I was laughed at when I first challenged RBA Governor Phillip Lowe, then he had to admit I was right.
Australia Post’s Bank@Post is expected to fill the hole left by banks closing branches in many rural and regional towns around Australia. I asked Group CEO and Managing Director, Paul Graham, for his views about how that’s going so far. His forthright response confirmed what bank closures mean in the communities where Australia Post is left to try and pick up the pieces. It is not the automatic solution the banks have suggested during the bank closures inquiry, which I knew from constituent feedback through my office.
Customers, explained Paul Graham, are looking for a broader scope of services than they are equipped to deliver. Small businesses particularly feel that they’re not able to access what they used to through their banking branches. Provision of cash has become an issue. Whilst there are those who say cash is going to die, Mr Graham certainly doesn’t see that in many demographics and areas of Australia.
With support from banks, Australia Post could extend the range of banking services. Whether for small businesses, the provision of cash, or even managing large numbers of gold coins following fundraisers, Australia Post rightly sees its over-the-counter Bank@Post services as essential.
More regional and remote towns are being left without a bank. Coober Pedy is a good example of a cash town given the nature of its work. Australia Post is now flying cash into that town on a weekly basis because the banks have all left.
There is obviously a vacuum left by the bank closures and post offices are well positioned to fill it with the right support.
Transcript
Senator ROBERTS: Thank you for appearing tonight. My questions are fairly short. At the Senate inquiry into regional bank branch closures, I asked Westpac CEO Mr King, ‘How much do you pay Australia Post for a community representation fee?’ The response on notice was: Westpac is happy to provide a specific figure, including the Community Representation Fee, however our contract with Australia Post requires both parties to agree to the release of any commercial details within the contract. Westpac would agree to Australia Post providing these details to the Committee. Are you happy to share those details today or on notice?
Mr Graham: No, we are not. Those are commercially confidential. We have a number of agreements with many banks and institutions. They differ from bank to bank. That would disclose what we believe is
commercially sensitive information.
Senator ROBERTS: Westpac is happy for you to disclose their contract.
Mr Graham: Again, they may be happy but that’s one side of the contract. We have contracts with over 81 financial institutions and would not be comfortable sharing that sensitive information.
Senator ROBERTS: I asked the Commonwealth Bank the same question and also on notice received the same reply, as one would expect from an oligopoly. Are you able to share the Commonwealth Bank’s community representation fee today or on notice?
Mr Graham: No, Senator. We will take the same approach to that. As I say, we have many contracts with many banks. It is commercially sensitive. Disclosing what one bank pays versus what another bank pays would create commercial risk for Australia Post.
Senator ROBERTS: How so? The bank is happy.
Mr Graham: In that we are negotiating with 81 different companies and, if they were aware of what other companies are paying, that would put us under a very difficult commercial situation.
Senator ROBERTS: Show them the high-price contracts.
Mr Graham: It would be good if we could do that, but it’s unfortunate the way that the negotiations would work.
Senator ROBERTS: It would help you if you picked the top one. Are you happy with the fees you’re receiving from your banking partners in Bank@Post for providing their customers with services?
Mr Graham: When the Bank@Post agreement was put in place three years ago, the scope of that was for what we would call rudimentary or very basic consumer banking services—the ability to deposit some money and take out some money. It’s fair to say that since that service has been put in place and since we’ve seen an increase in the number of bank closures the pressure that has been placed on our post offices that provide Bank@Post has increased. Customers are looking for a broader scope of services. Small businesses particularly feel that they’re not able to access what they would traditionally access through their banking branches. And the provision of cash has become an issue. Whilst a lot of people say cash is going to die, we certainly don’t see that, particularly in certain demographics and also in certain neighbourhoods where cash is still prevalent.
When we were set up, we were never established, from both a physical and a service perspective, to deal with cash. We’re happy to extend the range of services we provide to our customers at Bank@Post, be it small business or the provision of cash, but we would need that to be funded by the banks. A good example is Coober Pedy. It is a cash town given the nature of its work. We are now flying cash into that town on a weekly basis because there are no banks remaining in Coober Pedy.
Senator ROBERTS: I’m very pleased to hear that you’re supporting cash and keeping it alive. A lot of people are starting to swing back now, because they know it’s essential for freedom. Would Australia Post like to offer a wider range of banking services from an existing partner, such as Suncorp? If so, what services would you like to provide?
Mr Graham: As I referred to in my previous answer, we are seeing an increasing desire by regional towns, particularly when we are the only banking service remaining, to increase the range of services for small business—be that cash floats for the local hairdresser or the local coffee shop. One example recently was a footy team and the Country Women’s Association both ran a gold coin fundraiser over a weekend and our post office was inundated with 1,800 gold coins on the Monday. It was never equipped to handle that type of cash. We see there’s an ability for us to increase the range of services we provide, certainly for small businesses, and for the provision of cash for those small businesses. However, that would need an investment—in some cases in physical infrastructure, for safes and security, and also additional systems and training for our team—which we are prepared to do. That would obviously require support from the banks to enable those services to be extended.
Senator ROBERTS: So you’d welcome something like Suncorp, which is for sale right now? It’s sale to ANZ was blocked.
Mr Graham: We provide services to Suncorp today through Bank@Post—they are a Bank@Post customer—and 81 other financial institutions.
Senator ROBERTS: I’m not asking you to commit to Suncorp or anything like that, but does the concept of having a bank with branches already, albeit not as many as you have, appeal to you?
Mr Graham: That’s a question of policy, which is for the government. We’re very happy to provide our over-the-counter services, which we are well-equipped to do, certainly for basic banking services. But as I said, if we were to extend the range of those services we would need to look at those post offices on a case-by-case basis. A town in the Snowy is another case in point where the last bank left and our post office there does not have disability access, so, again, that challenge comes on Australia Post and we work with the banks to try to solve that. We see over-the-counter services and providing Bank@Post services, particularly in regional and remote areas, as essential services and we continue to be invested in those services.
Senator ROBERTS: Something Christine Holgate did a very fine job of doing was to listen to and address the problems of the LPOs—the licenced post offices. We haven’t heard much from them lately, so that is probably a pretty good sign, but I’d like to know what you think of your relationship with the LPOs. How’s that going? They’re fundamental.
Mr Graham: Yes, they are. They make up more than two-thirds of our branch network. They are partners in our network. We deal with both the key associations. I think our relationship is a very positive one. We are very transparent on what we are doing, the investments we’re making. We’re currently rolling out our PostPlus new point-of-sale system through every post office in the country—the largest single investment that Australia Post has ever made, over $250 million. This will create efficiencies for both our corporate and licenced post offices, and also create a better service experience for our customers.
Our relationship with them is healthy. We certainly listen to them. We spend a lot of time out in their post offices, understanding their needs and their challenges. I also spend a lot of time out; it’s one of the best parts of my job. But we also see, in certain areas, where they are financially challenged because of the reduction in foot traffic, because of the digitisation of services, and, as I mentioned in my opening address, certainly metropolitan areas where there can be significant overlap, we do see cannibalisation of licenced post offices by their fellow licensees in some of those areas. It is a changing financial environment for many of them, and we look to continue to support them where we can. Bank@Post certainly helps, as does the growth we’re seeing in our parcel business, and also investing in new systems which helps them become more efficient and better at serving their customers.
Over-the-counter transactions at NAB have decreased 70% since 2015. The BIG Four banks have actively discouraged people from withdrawing cash over the counter in the past several years. By training customers in this way, the banks have been able to produce a ‘shock and awe’ figure of 99.95% reduction in cash transactions.
Sounds incredible, yet that’s exactly what it is. It isn’t so much a shift away from cash by the public – it’s a shift in behaviour by the banks.
The banks have no idea how many people are using cash. They don’t see cash transactions. They are actively discouraging the use of cash, then coming out with statements that people don’t want to use cash, which is just plain wrong.
According to many constituents, if a customer goes to a branch of the NAB to use the counter services, there is a high likelihood they will be shown how to use the ATM. The NAB says that’s because they need to know and be fully aware of the alternative options. In June, the NAB is pleased to report they saw 96% of customers making digital transactions. How many of those were walked outside to do that?
Mortgage applications are now being conducted remotely by 40% of customers. Pre COVID the figure was zero, yet post COVID the NAB has found that customers are very happy to take up the digital services for buying a house. The NAB report that a massive shift has occurred over the last few years. Social distancing and lockdowns furthered their digital goals.
The NAB’s reported 99.95% less cash payments is just for bank transactions within the bank itself. All real-world cash transactions are an unknown figure. Customers still need to go to the bank though to withdraw their money to use it in their daily lives. How hard is that becoming?
Ross McEwan, CEO of the NAB, says there are thousands of ATMs available to do this freely, and also acknowledges that Australia is a large country. The NAB says it looks at a range of factors when making decisions to close branches, including feedback from staff members and what is happening in the community where it has invested. How much of that is about listening to customers’ needs?
Transcript
Senator ROBERTS: Thank you for appearing today. Your submission includes this statement: ‘Banking transactions made over the counter at NAB branches have decreased by 70 per cent since 2015.’ Is that a 70 per cent reduction in actual transactions; and, if so, what are the figures for, firstly, total over-the-counter transactions in 2015 and, secondly, total over-the-counter transactions now?
Mr McEwan: I’ll ask Krissie Jones to address that question.
Ms Jones: I’ve got the data from 2017 in front of me. We understand that, in 2017, there were 35½ million over-the-counter transactions through our branch network. Certainly, there has been a large reduction over the period since then and, at the conclusion of this year, we expect that there will have been a 71 per cent reduction. We’ve seen a massive shift over the last few years with our customers starting to use digital services. In fact, in June, 96.5 per cent of interactions were digital ones.
Senator ROBERTS: According to reports made to my electoral office, if one of my constituents goes into the NAB to conduct an over-the-counter transaction, it is likely that the teller will march that customer out to the ATM in front of the bank and make them conduct their business there. Does your 70 per cent reduction figure compensate for increases in the use of ATMs in front of your bank?
Mr McEwan: First off, we should probably look at the circumstances in which a customer is shown how to use an ATM. It also depends on the branch structure that we have, as we’ve got a number of branches that are open for standardised hours, which will probably be three hours a day, and the staff member may have shown the customer how to use the services 24/7. But I’ll pass over to Krissie because, again, she runs the network and is very familiar with what staff are being asked to do, in training and developing customers and showing them odd services. Krissie, maybe you could talk to the senator on that one.
Ms Jones: Yes, sure. We want to make sure that our customers are aware of all of the options that are available to them. If they want to conduct their banking in a branch, then we would welcome them using the over-the-counter services. But we want to make sure that, for those examples of when a branch isn’t open, they know of the alternative options. Over the last few years, we’ve added in new functionality to be able to deposit a cheque on your phone from the convenience of your home. So we really want to make sure that customers are fully aware of all of those alternative options, whether it’s phone banking, digital banking options or Bank@Post. But, of course, if a customer wants to come in and talk to their local branch team member to do their transactions, we welcome that too.
Senator ROBERTS: This is a quote from your submission: ‘Only three per cent of our personal banking customers exclusively use our branch network to conduct their banking.’ Could you define ‘exclusively’, please. Does one ATM withdrawal or one call to report a stolen card constitute the loss of ‘exclusive’, as in ‘did not exclusively use over-the-counter services’?
Ms Jones: We do publish some of this information in our FAQ sheets as well, but our definition of ‘exclusive’is really about when a customer walks into the branch. So ‘exclusive’ would be a customer who comes in and only uses that branch for their transactions; it would not include things like the use of ATMs or other services, such as digital transactions.
Senator ROBERTS: So, if a customer used a bank for over-the-counter services every time, except for one call to inquire about a bank card, would that mean that they do not exclusively use over-the-counter services?
Ms Jones: It’s a rolling period and so it would be that, in that period, that wouldn’t be the case. But we look at it over different rolling periods.
Senator ROBERTS: You say here, ‘Only eight per cent of our business banking customers exclusively use our branch network to conduct their banking.’ That’s one in 12, which seems a lot to ignore, doesn’t it? Asking that same question again, does the same definition of ‘exclusive’ apply?
Ms Jones: Yes, it’s the same definition of ‘exclusive’. For both our personal customers and our business customers, I think we are seeing a really big shift in the way that they’re transacting. As I’ve said, in June, we actually saw digital transactions occurring with 96 per cent of our customers. So there really has been a very big change. Also, we are seeing more of our business customers starting to use alternatives as well.
Senator ROBERTS: This is another quote from your submission: ‘Over 40 per cent of home lending appointments are held via videoconference.’ That means that 60 per cent are not using videoconference; is that
correct?
Ms Jones: Yes. We offer a range of ways in which our customers can take out a home loan with us. They can go onto our website to find an appointment that is the most convenient for them. That can be in their local branch or over the phone; it can be with a banker coming to their home or their workplace; or it can occur by video. What we are seeing, even just in the last week, is more than 60 per cent happening over the phone or via video. But a large proportion of customers still want to come into a branch to undertake that conversation with the banker.
Mr McEwan: Just to give you a feel for the rapid change in those numbers, I can say that, pre-COVID, that was zero; we did not have that facility available. Today, as Krissie has said, these stats were put at 40 and, in the last week, that has gone even higher. So customers are very happy to take up those services, and it doesn’t matter whether they are regional or city-bound customers.
Senator ROBERTS: I quote again: ‘99.95 per cent of all payments made by or received by NAB customers were made digitally in 2022.’ Does that include when a person ‘beeps’ to pay for a coffee, petrol and the minutiae of everyday life?
Mr McEwan: Yes, it does.
Senator ROBERTS: If I withdraw cash from an ATM and spend that cash in a farmers market—in fact, I am noticing an increasing number of small retailers asking for cash payments—how would you know that I’ve paid with cash or not?
Mr McEwan: By way of a retail transaction?
Senator ROBERTS: Yes.
Mr McEwan: If a person paid cash, we would not know.
Senator ROBERTS: That’s right.
Mr McEwan: What are you asking for help on with that one? When people have paid with cash at a market or out in society, we have never known what those numbers were.
Senator ROBERTS: So what is the statistical basis for the 99.95 per cent figure, when you have no idea of what your customers are using cash for?
Mr McEwan: No. That 99.95 per cent figure of the transactions that come through our bank are done digitally; that is, the ones that we’re aware of. The definition of that stat hasn’t changed, as we’ve never known
what was going on with a trader or a person at a market who is taking cash for goods. Those stats have never appeared in our stats.
Senator ROBERTS: I made this same point with Westpac, I think it was: so we don’t really know what people are using cash for, but people want to use cash outside of the banking transaction.
Mr McEwan: That’s correct. Yes, you’re absolutely right: I do not know what you use your cash for and you don’t know what I use my cash for. But the point that we’re making is that 99.95 per cent of those interactions with the bank are now done digitally, and that doesn’t preclude customers doing what they like with their cash.
Senator ROBERTS: So 99.95 per cent of payments with NAB might be digital. With customers exchanging money with other customers, we don’t know what it is.
Mr McEwan: No, that’s right. Again, that’s not a service that I provide. Your paying cash to somebody else is not a service that I am involved in; it’s a service that they do themselves.
Senator ROBERTS: No. But for me to pay someone else cash, I need to come to NAB to get the cash.
Mr McEwan: Yes, or you could go to 4,000 ATMs around the country that I pay for you to use and they’re free to you, or you could get the money out at a branch or at 3,400 Australia Post outlets; they will give you the cash.
Senator ROBERTS: Cash is still important. So, on the face of it, your regional banking hubs are a good idea. I assume that these centres are there to handle face-to-face transactions with people from areas where a branch has been closed. You mentioned Emerald in Queensland, where I used to live some years ago. Can I ask: what is the catchment of that Emerald bank, please? How far away are the areas that it is designed to service?
Mr McEwan: We’ll have to look at that. Krissie, do you know the Emerald catchment at all?
Ms Jones: I do, but I want to make sure that we’ve got the facts right, so perhaps I could come back to you on that. We do have surrounding branches to Emerald. As well as our branch in Emerald there are Bank@Post facilities.
Senator ROBERTS: It looks to me as though the next branch, heading west from Emerald, is Longreach, which is four hours away. Is that a good indication of how far apart these regional branches are?
Mr McEwan: The regional branches will be quite different; some may well be at a shorter distance than that and others will be a longer distance apart. As you know, Australia is a huge country. But the point there is that there is a very large number of regional Australia Post offices that people can get to as well, which will service those needs.
Ms Slade: Krissie, you might want to talk about the things that we look at and take into consideration, such as where customers are travelling to already and the other branches that they’re using.
Ms Jones: When we’re making investment decisions or the decision to close a branch, we look at a range of factors, which include: where are our customers shopping; where are they banking; where are they are travelling to, whether it’s to see the doctor or the mechanic; and where do we need to invest to support them? So there’s a range of things that we take into consideration when we’re not only making investments but also making the difficult decision to close. We also seek input from our staff on the ground. We have a large number of colleagues—around 2,300 across NAB—who work across regional Australia, and many of those are bankers who face customers every day. That may be in retail, or it may be in regional and agri, which is where we have over 774 bankers providing services in those areas. So we listen to feedback from our staff members as well about what’s happening in that community, what’s most relevant for that community and what’s the way in which we can shore up in order to serve them as well.
A theme throughout this inquiry into Australia’s bank closures is that bank representatives continue to say they are committed to providing cash for the foreseeable future despite Australians using cash less frequently.
The Commonwealth Bank has no plans to remove the distribution of cash even though it is a cost to the bank to keep cash available, according to CEO Matt Comyn.
I know that Australians are afraid of losing cash. There’s no doubt that the best way to keep cash alive is to keep on using it.
Despite regional bank closures, more than 90% of customers remain which is seen as a sign less customers see a physical branch as important because more of them are using online services.
I asked Matt Comyn about the bank’s digital expansion which includes the CommBank App. He said this app is used by eight million customers and the vast majority of customers appreciate the bank’s investment in it. The bank’s contract with Australia Post, worth tens of millions of dollars, is a partnership allowing customers to make transactions at Australia Post outlets where the bank has been shutting down branches. For many rural customers the Bank@Post scheme doesn’t offer everything they need.
We also discussed the many ways the Commonwealth Bank along with the rest of the Big Four Banks are supported by the government including bail-in, props such as government guarantees for overseas borrowing, regulatory support and their advantages over smaller banks.
When I asked about the shareholdings by asset managers such as BlackRock, Vanguard and State Street, Matt Comyn responded that most of the bank’s shareholders are Australian retail shareholders, domestic superannuation shareholders, and shares held by 12 million Australian families. Share dividends will be high this year with a record $10.2 billion profit and a pay packet for its CEO of $10.4 million.
The Commonwealth bank serves about 10 million customers. Among those customers are many Australians who are worried about digital controls, branches closing, and the gradual loss of cash as a readily available and convenient means of transaction. The Commonwealth Bank prides itself on supporting its customers so let’s hope they’re also a listening bank.
Transcript
Senator ROBERTS: Are you aware of what has happened to Qantas’s reputation in the last few months?
Mr Comyn: Yes, I am.
Senator ROBERTS: You represent a bank which provides financial services, and cash is fundamental to those for many people. People are afraid of cash. Whether you agree with that or not, they are afraid of cash and
they’re increasing their use of cash. As to your costs and services, from your statement I concluded that they’re reviewed annually, but are you considering the whole service and what people really expect from your bank?
Mr Comyn: Yes, absolutely we consider the whole service.
Senator ROBERTS: More than 90 per cent of your customers stay after a bank closure?
Mr Comyn: Yes.
Senator ROBERTS: So, your customers are sticky?
Mr Comyn: Yes. It could be perceived in a slightly different way as well, which is the role of a physical branch in some customers’ minds perhaps isn’t as important as it was. I sort of agree with that and I think it very
much depends on different customers. I think a range of different conclusions can be drawn from that.
Senator ROBERTS: I agree with you. The fact is your customers are sticky and so are other customers. You mentioned cross-subsidisation of electronic customers on cash is $40 per customer?
Mr Comyn: What I said was we calculated we think the cost of providing cash, and I believe providing cash will continue to be important and is an important issue. I suspect we pay a significant proportion of the costs of providing cash in Australia. I don’t say that as a complaint, I say it more as a statement of fact. We serve about 10 million customers. It works out to be about $40. The reality is, like anything, there’s a small proportion of customers who use cash very often. There’s a much larger proportion who don’t use it at all, and there would be somewhere in between who are using it infrequently across that. I’m not exactly sure I understand the point you made about ‘afraid of cash’? I think you said earlier on in your question that Australians are afraid of cash? Did I mishear you?
Senator ROBERTS: Sorry. They’re afraid of losing cash. Thank you for picking up on that. That’s a very important point. They’re afraid of losing cash. We’ve seen a digital identity mooted by the Morrison government, now raised by the Labor government, and a bill that was introduced not into parliament as such for processing but into the public debate in parliament last year. We’ve seen attempts to limit the cash ban bill. People are scared, especially after losing a lot of their fundamental freedoms in the last three years under COVID mismanagement. They’re worried about being controlled in all aspects of their lives. How much has your bank spent on digital expansion that cash customers did not ask for?
Mr Comyn: It would be very difficult for me to answer that, because we haven’t asked every one of those 10 million customers.
Senator ROBERTS: I understand that.
Mr Comyn: I think we could reasonably assume that with our retail bank, the CommBank app, which is our mobile banking app, we have more than eight million users. On average, they log in 39 times per month. It’s
clearly one of the most important, if not the most important, feature that customers use. I’d say that clearly the vast majority of customers highly value the investments that we make, both in terms of hopefully helping make it easier for them to manage their financial lives but also as Senator White was asking, to make sure it’s the safest, secure and most resilient experience possible.
Senator ROBERTS: We’ll come back to cash in a minute. You just said you’ve got a commitment to cash?
Mr Comyn: I believe cash will continue to be available for many years within Australia. I don’t think people should fear that cash is going to be removed from circulation.
Senator ROBERTS: Is that your commitment or is it just your belief?
Mr Comyn: I can only make the commitment on behalf of the Commonwealth Bank.
Senator ROBERTS: That’s what I mean.
Mr Comyn: We certainly have no plans to remove cash distribution or the provision of cash in Australia. I don’t think that’s feasible, and I don’t think that would be desirable, certainly in the foreseeable future.
Senator ROBERTS: Let’s turn to Australia Post and we’ll come back to cash. How much do you pay Australia Post for the community representation fee—not the transaction but the community representation fee?
Mr Comyn: I mentioned in the introduction it’s tens of millions of dollars. I know I’m protected by parliamentary privilege. Would you mind if I checked whether there’s any commercial—
CHAIR: You can take it on notice.
Mr Comyn: I know what the number is. I don’t have any difficulty sharing it with you, but I probably should check that.
CHAIR: I think usually the best idea is to take it on notice. Mr Comyn can provide the information to us.
Senator ROBERTS: Is your concern one of the figure or of releasing it?
Mr Comyn: I’m not personally concerned with either of those dimensions, but since it’s in a contract entered between the Commonwealth Bank and Australia Post I just want to doublecheck if there are any contractual
restrictions and probably out of courtesy let Australia Post know.
Senator ROBERTS: It was released in 2018 as being $22 million for each bank.
Mr Comyn: It’s more than that.
Senator ROBERTS: So, you’re currently flooding Australia Post. When I say ‘you’, it’s not just the Commonwealth Bank but all banks. You’re closing branches in the regional areas and Australia Post is getting flooded with customers. Is it more than $22 million?
Mr Comyn: The totality of what we pay Australia Post? Yes, it is. Again, not to get caught up in the semantics, I wouldn’t characterise it as ‘flooding’. We pay on a per transaction basis to Australia Post with an extension beyond 2030. We entered into a long-term contract to give Australia Post and some of those individual franchisees certainty. We meet—I know Mr Jones does—regularly with Australia Post to talk about are there opportunities for us to continue to improve the service to be able to support Australia Post’s customers better and to make sure as many transaction types are available in Australia Post to ensure the convenience is as high as possible.
Senator ROBERTS: So, you’re treating them as a partner?
Mr Comyn: Yes.
Senator ROBERTS: Coming back to the structure of the banking system in this country, especially the big four banks, there is protection for the banks if the banks go overboard in risk or the economy collapses. You’ve got protection in bank bailing, which was legislated I think in 2018. That was confirmed to me by a senior Treasury official two years ago. You’ve had props from the government in the past, and government guarantees for things like overseas borrowing. You have enormous support. Four pillars for a start is a regulatory support. You have more generous treatment from APRA in risk weighting. You have barriers to entry that the regulations provide for protecting the big four. You have a barrier that’s legal in the sense that you’ve got deep pockets and you can fund enormous defences in lawsuits brought against you. I’ve seen this first-hand when chaired the Senate select inquiry into lending to primary production customers. You dominate the cash distribution network. You’re essentially now, as a result of the support from the community and governments, a low-risk business. And your customers are sticky. That’s a hell of a ride.
Mr Comyn: I’d challenge just about every one of the assumptions that you made then, but I’m not exactly sure where that would get us. I definitely wouldn’t characterise it in terms of the context that you did. Are we heavily regulated? Absolutely. Is there a lot of investment required to manage and appropriately respond to that regulation? Yes, there is. Do I think significant financial institutions in Australia and others should be heavily regulated? Absolutely. Do I think it’s important that Australian banks and the Commonwealth Bank have unquestionably strong levels of capital? Absolutely. Because we’re big importers of capital and the success of economies and financial institutions are necessarily very intertwined. I could give you multiple examples but I don’t know how helpful it would be. Even if you think about capital levels, Australian banks hold considerably more capital than many other financial institutions and jurisdictions. As a policy setting I think that’s absolutely appropriate, but to help make the numbers real that costs across the major banks per annum between $7 billion and $11 billion. I’d characterise a lot of things differently. I think sometimes our funding facilities are described in a way that’s not necessarily matched by our experience.
Senator ROBERTS: I acknowledge your view. I point to the fact that every monopoly in the world—I’m not accusing you of being a monopoly—is there as a result of government. You say you have a low-risk business. Your ownership of the Commonwealth Bank, a significant controlling portion, includes the Vanguard Group and BlackRock. I’m reading from your registry: Vanguard Investments, Norges Bank, Goody Capital Management, BlackRock Advisors, Vanguard Global Advisors and a couple more. When I look at the other three big banks, they’re almost identical in terms of the significant controlling interests. It seems to me that we have one bank with four logos. That’s a very tight industry. You hide behind the regulations, I’d put it to you. When I chaired that Senate select inquiry into lending for primary production customers, I saw the services almost identical from each of the banks. The strategy is almost identical. The disregard for customers is almost identical as is the hiding behind regulations. Regulations are there to protect your bank; that’s the way I see it in practice. It’s almost identical across all four banks. Directors appoint you, I take it, and your directors are appointed by the likes of BlackRock, Vanguard, First State and State Street. The banking sector with the four big banks seems to be a very cosy club and you can do whatever you want with very sticky customers; is that correct?
Mr Comyn: No, it’s not. Again, the shareholder base is quite different to the way you outlined. There are quite significant differences even across the major banks. We’re an extremely widely held retail stock. Approximately 50 per cent of our shareholding is held directly by retail onshore shareholders. Obviously that’s a result—
Senator ROBERTS: How many of those shareholders vote?
Mr Comyn: Every one of them is entitled to vote.
Senator ROBERTS: How many of them vote?
Mr Comyn: I couldn’t give you the exact number. One thing I would say is clearly I meet with institutional shareholders. I just came back from meeting with some institutional shareholders internationally. I can assure you I get stopped and asked about the performance, profitability, questions on people’s minds, and the dividend by a lot more retail shareholders than I ever do from international. To finish quickly on the shareholder base, more than 50 per cent would be direct to retail. The next approximately 30 per cent would be institutional but domestic, primarily through superannuation, some of the biggest industry and superannuation funds. We actually have quite a small representation internationally. You mentioned some of them. There’s a mixture of both. You touched on some of our index funds. Some have a variety of different mandates from either US, North America or within Asia. Fundamentally if the Commonwealth Bank is profitable, 75 per cent approximately of our profits go to our shareholders, predominantly Australian families—more than 12 million. I can assure you based on my experience they absolutely do value it. I’m not sure the point you’re making on regulation, either. Obviously we work very closely with regulators.
Senator ROBERTS: The point I’m making was that regulations help you because they give you protection. It’s very difficult for a small borrower to take you on legally.
CHAIR: We’re going to have to rotate the call. Mr Comyn, you can briefly respond to that if you want to. It’s up to you.
Mr Comyn: In the interests of time
Your future is digital and Westpac’s is even higher profits. Once again, the commercial in confidence excuse was trotted out around disclosure of the cost of the Australia Post community representation contracts that are allowing the banks to close many of their regional branches. In 2018 the amount was public information so what’s changed? Westpac has taken the question on notice.
Almost a quarter of Australians cannot do digital banking. Either they lack access or the necessary skills to go online for their banking. I asked Westpac why the bank is turning its back on these Australians. The way Westpac’s CEO Peter King views this is that 96% of their own customers are engaging with them digitally so all is well.
Has Westpac looked at the fact they’re pushing people online who don’t actually have the capability to stay safe and secure on that platform? Instead of directly answering my question, Peter King said the three biggest scam losses are through investment scams, romance scams and business email compromises. Banks are doing everything they can, he said, to prevent this by blocking suspicious payments and educating customers.
Westpac is enthusiastic in its push towards digital. In Townsville for example, where Westpac has shut its doors, the bank conducted education sessions to help customers adapt to the digital transition. Clearly there are factors that limit digital banking in regional Australia. Westpac’s answer isn’t to reverse the closures, it’s to improve its banking app to do everything. The bank intends to shoehorn people into the digital economy whether they like it or not. Peter King believes this shift is much broader than just banking because all government and essential services will become digital too.
Will there still be cash? Peter King thinks that cash will still exist in the economy but its use will decline. Cash made up 70% of all transactions in 2007. That figure is now 13% and trending down. Where telecommunications or power are cut off, Westpac would get cash into an affected area by flying it in. Telecommunications is obviously critical.
Finally, I asked if Westpac’s data might not be accurate. It isn’t capturing all cash transactions. Once cash is circulating there is no way to track it, so perhaps they’re not seeing the real picture of cash use in the economy. I was told the Reserve Bank undertakes surveys into how cash is used and in Westpac’s view there is less call for cash making it less important in the scheme of things. Online banking and Bank@Post will replace bank branches, particularly in regional areas where Westpac and the other big banks are pulling away from in person services.
Profits over personal touch is what’s in store for customers in the digital economic future. In a move we’re seeing across the corporate and political sectors, the Big Four are making the data fit the narrative so they can achieve their goals. Where’s the care factor?
Transcript
Senator ROBERTS: Just sticking briefly with Australia Post, how much do you pay Australia Post for a community representation fee, not the transaction fee?
Mr King: It’s subject to some commerciality requirements. I’ve said it will be over $200 million over 10 years, including the fee. We might see whether we can provide that separately in confidence.
Senator ROBERTS: It wasn’t commercial-in-confidence in 2018. Is something being hidden?
Mr King: No. We’ll work with Australia Post on how much detail we can give you.
Senator ROBERTS: So, you’ll take that on notice?
Mr King: Yes.
Senator ROBERTS: Your submission relies on digital technology as a fallback to the removal of physical branches, yet 23.6 per cent, almost a quarter of the population, either lack access to or the ability to handle digital banking. Why are you turning your back on almost a quarter of the population? Do they not have enough money to warrant your attention?
Mr King: What we see in our customer base is 96 per cent of customers are engaging with us digitally, in terms of transactions.
Senator ROBERTS: That’s your customer base. I asked about the population of Australia. Almost a quarter don’t.
Mr King: In terms of our service offering, if you take the cash, we have our own branch network, and the Australia Post, and an ATM arrangement. So, there are plenty of opportunities for customers who still want to use cash to get cash through the country.
Senator ROBERTS: The ACCC reports that Australians lost $3 billion in online scams in 2022. Has Westpac done any work on what share of that has come from Westpac and the banking sector in general, forcing this 23.6 per cent of the population online when they lack the skills to avoid being scammed? Is Westpac simply setting up these people to lose their money in an online scam?
Mr King: In short, no. There are three big drivers of scam losses, and the biggest one by a long way is investment scams. As to investment scams, we have less financial planners in the country, more people doing
research, including on social media platforms, and that’s devastating. Romance scams are still pretty high in terms of people being prepared to pay for romance scams, and then there’s business email compromises. A lot of those are issues around how customers are being tricked out of their money, effectively. The way the banks are reacting is to do everything we can to help customers make better decisions. So, prompt them about those types of things, put friction in the system to stop the payments. But we do need to help our customers pick these scams up as well.
Senator ROBERTS: In towns where you close your branch and provide education to customers on how to use online banking safely, do you open a digital education centre?
Mr Miller: In a regional town where we’re closing a branch we have a fairly lengthy period where we’re consulting with our customers. We run education sessions from the branch before it closes. When the branch has
closed, we’ve enabled our call centres to be able to take calls from customers anywhere in Australia where they can continue that digital education with customers online. We would have had 340,000 of those conversations with customers since March this year.
Senator ROBERTS: Some of them are a physical, face-to-face in town where the bank is about to close?
Mr Miller: Absolutely. That’s our priority during the transition period.
Senator ROBERTS: What factors would limit digital banking in regional Australia?
Mr King: For us, I think we’re looking to have everything you can do in the bank in the app. We’re not there yet, as Ross said, but we will be. Another is, as you just said, helping people transition to the digital economy. But I think it’s broader than banking. If I look at government services, banking services and most services in the country, they’re all going to go digital, so we have to help people get on. Then telecommunications is critical as well.
Senator ROBERTS: Are you saying there will be no cash, none of this stuff?
Mr King: No.
Senator ROBERTS: You said ‘all digital’?
Mr King: I believe there will still be cash in the economy but the usage will go down. I think I used a stat before that, in 2007, 70 per cent of consumer transactions were cash based. It’s now 13 per cent and it will go
further down; that is the trend. Cash will be less important in the scheme of things than it has been historically.
Senator ROBERTS: What are customers supposed to do if the bank or the NBN or the telco fails for a whole day? I noticed in Mount Isa, the day before I arrived recently there was no internet and no EFTPOS so people had to use cash. Business was open purely because of cash.
Mr King: That is an important part, but also the merchant terminals can go into a mode which is called offline for a period of time, but you need your card. You need to put your physical card in. It’s hard to use a digital wallet in that situation. There are fallback facilities when telecommunications are down. It’s a bit harder when the power is down, obviously. In that case, like we do in any event, a flood or fire, we would get cash into the area and a way to distribute it. We did that in Lismore through the floods by flying it in.
Senator ROBERTS: If a constituent of mine goes to a farmers market and pays cash, how is that captured in the data for cash use and electronic payment?
Mr King: It will depend on how that merchant reports. Certainly, when we’re tracking cash usage we’re looking at money going in and out of the banks. It will depend on how that person banks, whether they go near a
bank at all. They might just spend it. The Reserve Bank has the data on how much cash is on issue, and then it touches the bank at certain points but we don’t see 100 per cent of it because some of it’s in the economy and going around without us seeing it.
Senator ROBERTS: That’s exactly the point, isn’t it? The data does not capture all of the cash transactions?
Mr King: If it doesn’t go through us we won’t see it; that’s right.
Senator ROBERTS: Correct. Could the volume of cash transactions occurring outside of the banking sector be quite different to the data you present as being the reduction in cash transactions?
Mr King: Possibly, but the Reserve Bank also does periodic surveys where they survey consumers on how they’re using cash. That doesn’t rely on the reported data. You also get surveys. Our experience in what we’re
seeing is there is less cash being used for transactions, and much more cards and particularly debit cards are being used for transactions.
Senator ROBERTS: I’m being sent complaints about queueing in the branches that remain after closures in the area. Your point of presence is now inadequate. If a customer wants to use face-to-face and their branch is
closed, then they go to the next nearest branch which is queued out the door so they give up and go home and use phone or internet or banking, would you consider your bank as being helpful?
Mr King: As I started with, customer service has to improve. If there are examples from your constituents, send them through and we’ll have a look.
At a recent Senate Banking Inquiry I spoke with Michael Lawrence, Chief Executive Officer of the Customer Owned Banks Association.
I know that many of our supporters hold the belief that more regulation will bring the banks under control. The truth is that the banks will always have smarter lawyers than the government. Regulation becomes a barrier to entry of new or small players wanting to compete with the big banks. At the same time, the big banks do whatever they want with only the occasional penalty that is clearly not enough to stop them.
The answer to this dilemma is a Government-owned bank that provides the existing banks with real competition by running the bank for the benefit of the customers and shareholders equally, rather than entirely for the benefit of shareholders, as the banks are doing at the moment. The difference will be especially noticeable in the areas of customer service and ethics.
Suncorp is the 6th largest bank in Australia. It is on the market for a bargain price of $4.9 billion. My proposal is for the government to buy Suncorp Bank outright using the Future Fund and re-purpose it to provide the full range of banking services through Bank@Post.
This would offer real competition to the big banks. By running the Post Office Bank using a modified Code of Practice it guarantees the customer a bank that will not behave like greedy, immoral, profiteering crony capitalists.
That would be a refreshing change.
Transcript
Senator Roberts: Thank you, Mr Lawrence and Ms Elliott, for returning today. You made some comments about regulation, Mr Lawrence. Would less regulation lead to more competition and better service?
Mr Lawrence: We don’t advocate for less regulation, because we need to be regulated in the same manner as any bank. What we ask is that it be targeted at the objective. It needs to take into consideration business models. It needs to take into consideration the size and the complexity, rather than a broadbrush—Senator ROBERTS: Are the big four banks hiding behind excessive regulation that is really a barrier to entry for your smaller banks?
Mr Lawrence: I can’t speak for the big four banks. What I can say—
Senator Roberts: I am asking you for your opinion on the regulation of the big four banks, not to speak for the big four banks.
Mr Lawrence: The big four banks are facing the same regulation, but it gets magnified because of their size and complexity. They do have more resources to put towards that regulation and compliance. As I said, it comes back to the size of ours. You only have to go back to October 2021. In one month, we had design and distribution obligations land, we had open banking time lines to be met and we had three recommendations of the royal commission. If you are a customer-owned bank with 20, 50, 100 or 1,000 staff, that’s a significant amount of regulation that takes you away from focusing on your customer. It’s that proportionality.
Senator Roberts: Did you see my questioning of the CommBank chief executive, Mr Comyn, this morning?
Mr Lawrence: Yes, I did.
Senator Roberts: I put it to him that the regulations are a barrier to entry for anyone outside the big four banks.
Mr Lawrence: My opinion is that the complexity of regulation that we have today would be deemed to be somewhat of a barrier for new entrants.
Senator Roberts: I go to your letter which accompanied your submission. You say:
Solutions that help, not hurt
Two policy solutions canvassed by stakeholders—a Government-owned bank and a community service obligation—would be anti-competitive interventions detrimental to our sector’s ability to provide services for regional communities.
On page 10 of your submission you say:
The attractiveness of an Australia Post Bank with an explicit government guarantee for customer deposits would almost certainly reduce deposit flows to privately owned banks…
Are you aware that all bank deposits of COBA members are already covered by the government’s Financial Claims Scheme bank guarantee?
Mr Lawrence: Yes, they are covered.
Senator Roberts: Yes. It says so on your website. Are your words, then, an acknowledgement that the Financial Claims Scheme is underfunded and never likely to be used?
Mr Lawrence: I am aware of the Financial Claims Scheme. Do I think it will ever be used? I think if you look at the people who are funding it, they are not necessarily the ones that are at risk. It could well be used.
Senator Roberts: Could you explain that?
Mr Lawrence: I don’t have the list of everyone who is funding the Financial Claims Scheme, but there are organisations that aren’t as heavily regulated that could be the recipient.
Senator Roberts: Of the Financial Claims Scheme guarantee money?
Mr Lawrence: Not of the deposit guarantee, if that’s what you are referring to.
Senator Roberts: Yes; not of that?
Mr Lawrence: Not of that. To have a guarantee on deposits, you have to be an authorised deposit-taking institution, and therefore you are fully regulated.
Senator Roberts: The proposal One Nation has raised is to ask the Future Fund to purchase Suncorp bank and operate the bank commercially, under a modified Banking Code of Practice that guarantees face-to-face service, cash availability and the provision of service guarantee—a code you would be free to use as well. Then Suncorp could expand its services through Bank@Post. I note your objections to a government-owned bank and to Australia Post becoming a bank. Which, if any, of these objections would relate to the Suncorp proposal that I just outlined?
Mr Lawrence: We haven’t taken a position on the Suncorp merger, if that’s your question.
Senator Roberts: No. My proposal is for the Future Fund to purchase Suncorp bank and to operate the bank commercially, under a modified Banking Code of Practice.
Mr Lawrence: The question to us is?
Senator Roberts: Have you got any objections to that?
Ms Elliott: It is something we would need to consider. We have fantastic banks in Queensland ready to serve the public. We wouldn’t be looking for a government-backed intervention that would be to the detriment of the existing competitive market that involves customer-owned banks.
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