CBA Axes “Foreign” ATM Charges

The CBA today (yes on a Sunday!) has announced they are killing the ATM charge incurred by non-CBA customers withdrawing cash from their ATMs.

In a first for an Australian bank, Commonwealth Bank has removed ATM withdrawal fees so all CommBank and non-CommBank customers won’t be charged an ATM withdrawal fee by us when they take cash out at any of our 3,400 ATMs.

RBA data shows that Australians made more than 250 million ATM withdrawals from banks other than their own last year so the move is designed to increase convenience and bring savings.

“Australians have complained for some time about being charged fees for using another bank’s ATM,” Matt Comyn, Group Executive, Retail Banking Services, said today.

“We have been listening to consumer groups and our customers and understand that there’s a need to make changes that benefit all Australians, no matter who they bank with. This is one of the steps we’re taking to make that happen,” Mr Comyn said.

“As Australia’s largest bank, with one of the largest branch and ATM networks, we think this change will benefit many Australians and hopefully demonstrate our willingness to listen and act on customer feedback.”

No ATM withdrawal fee access applies to CommBank-branded ATMs and excludes Bankwest ATMs and customers using overseas cards.

The number of withdrawals from ATMs (and the number of ATMs in use) are falling, as other non-cash payment mechanisms proliferate – such as pay wave, debit cards and mobile payments.  We expect the downward trajectory to accelerate as non-cash alternatives continue to grow. Customers can also get cash out at supermarkets, and this alternative has become popular for those who need to get their hands on real notes.

Under half have a charge attached, those are withdrawals from another bank’s ATMs.

As we said in a recent post there is a generation shift in play as digital natives continue to adopt smartphone based payment options, from Applepay, to NFC transactions in shops, or apps like paypal as well as the move to debt. Even digital migrants are using electronic mechanisms, such as smart phones, internet banking, contactless payments and Bpay is also a popular option.

Data from the RBA shows the volume of ATM cash withdrawal transactions has fallen by 15% over 3 years, whilst the gross value has slipped a little (and fallen in post-inflation adjusted terms). Debit card transactions are more than taking up the slack. But there is also more going on here.

We are approaching a tipping point where the economics of ATMs will not make sense, other than at a few high traffic locations, as there a fixed costs relating to installation and maintenance (including the cash top-up) and income is linked to volumes. There was a proliferation of third party ATMs in for example retail sites in the 1990’s, but these are getting less use too. So we think the number of machines will fall.

Meantime the ubiquitous smart phone is set to become your personal finance assistant, your electronic wallet and electronic credit card. Just do not lose your phone!

As a result, traditional channels such the the branch, ATM and even plastic are all under threat. Cash will become less important in every day life, but it will remain, used perhaps by people less comfortable with the technology, or in the black economy. It would not surprise me if down the track larger bank notes started to disappear under the guise of migration to digitally based more cost-efficient payment solutions, which just happen also to be easier to track.

Meantime, the ATM just got out-evolved by the smartphone.

Around $500 million was charged by banks to customers, and the average fee is $2 per transaction.  CBA has the largest fleet of ATMs across the country, with more than 3,400.

This is a move which was expected, given there are overseas precedents to removing ATM fees, and volumes are falling.  Of the 70,000 ATMs in the UK network, around 16,000 charge users a fee per withdrawal.

CBA will hope to gain a positive reaction, to counter the recent negative publicity surrounding its business.  It will be interesting to see if other banks will follow (some will require IT modifications, so it may take some time), we suspect they might, which would be a small win for consumers.




DFA’s SME Report 2017 Released

The latest results from the Digital Finance Analytics Small and Medium Business Survey, based on research from 52,000 firms over the past 12 months, is now available on request.   You can use the form below to obtain a free copy of the report.

There are around 2.2 million small and medium businesses (SME) operating in Australia, and nearly 5 million Australian households rely on income from them directly or indirectly. So a healthy SME sector is essential for the future growth of the country.

However, the latest edition of our report reveals that more than half of small business owners are not getting the financial assistance they require from lenders in Australia to grow their businesses.

Most SME’s are now digitally literate, yet the range of products and services offered to them via online channels remains below their expectations.

More SME’s are willing to embrace non-traditional lenders, via Fintech, thanks to greater penetration of digital devices, and more familiarity with these new players. In addition, many firms said they would consider switching banks, but in practice they do not.

Overall business confidence has improved a bit compared with our previous report, but the amount of “red tape” which firms have to navigate is a considerable barrier to growth.

Running a business is not easy. In some industries, more than half of newly formed businesses are likely to fail within three years. We found that banks are not offering the broader advice and assistance which could assist a newer business, so even simple concepts like cash flow management, overtrading and debtor management are not necessarily well understood. There is a significant opportunity for players to step up to assist, and in so doing they could cement and strengthen existing relationships as well as creating new ones.

We think simple “Robo-Advice” could be offered as part of a set of business services.

The sector is complex, and one-size certainly does not fit all. In this edition, we focus in particular on what we call “the voice of the customer”. In the body of the report we reveal the core market segmentation which we use for our analysis and we also explore this data at a summary level.

Here is a short video summary of the key findings.

The detailed results from the surveys are made available to our paying clients (details on request), but this report provides an overall summary of some of the main findings. We make only brief reference to our state by state findings, which are also covered in the full survey. Feel free to contact DFA if you require more information, or something specific. Our surveys can be extended to meet specific client needs.

Note this will NOT automatically send you our research updates, for that register here.

ANZ first Australian bank to roll out Voice ID for mobile banking

ANZ says it will today be the first Australian bank to roll out Voice ID technology on mobile banking enabling customers to complete higher value transactions conveniently and securely.

With Voice ID, ANZ customers can now make ‘Pay Anyone’ payments of more than $1000 on their mobile without needing to log into internet banking, or remember additional passwords or PINs, or visit a branch. They can also use Voice ID to make BPAY payments of more than $10,000 on their mobile.

Commenting on the announcement, Managing Director Customer Experience and Digital Channels, Peter Dalton said: “This is a significant security update that will make it easier for our customers to complete high value transactions on their smartphones.

“Customers increasingly want the convenience of banking on their digital devices and this solution delivers that with the added level of voice biometric security.

“This will be particularly good news for our small business customers who regularly need to make payments of more than $1000 on the go and will only need their voice to authorise those transactions.”

The rollout comes after ANZ completed a successful pilot program with the new technology in recent months and will be available for customers using the Grow by ANZ app from today. It will then be rolled out to other digital channels across the bank.

ANZ has developed Voice ID with world-leading voice biometrics company Nuance to bring the new technology to Australian customers.

Nuance managing director Aust & NZ, Enterprise Division Robert Schwarz said: “ANZ is taking a forward-thinking yet secure approach to identity verification with Voice ID, making it fast, easy and secure for customers who are on-the-go to perform high value transactions.

“Through the ANZ mobile banking app, Voice ID uses proven voice biometric technology from Nuance that is more secure and more convenient than legacy authentication methods.”

NAB Launches Virtual Banker For Business Customers

NAB says it is the first bank in Australia to launch a digital virtual banker specifically for business customers, enabling them to receive instant answers and assistance with common banking questions and tasks.

NAB’s virtual banker is in pilot and available 24/7 on, providing help with more than 200 common questions related to the servicing of business banking accounts.

NAB Chief Operating Officer Antony Cahill said the development of the virtual banker continued NAB’s commitment to providing leading solutions that make life easier for customers.

“Our research shows that two thirds of Australian SMEs cite dealing with administrative tasks as taking a lot of effort, and our customers desperately want to spend more time on their business and less time on dealing with admin tasks.

“’We’re working hard to make banking an easy and supportive experience for our customers and technology like this helps save business customers critical time. When they have a question about their banking, our virtual banker is there to help solve it 24 hours a day, seven days a week; it’s a simple and seamless on-the-go experience.

“We will continue to develop the virtual banker over coming months, enabling an even broader and more diverse range of instant answers and guidance for business customers.”

The virtual assistant’s artificial intelligence is derived from thousands of real-life customer enquiries. There are more than 13,000 variants of the 200 questions the virtual banker can answer; if the question can’t be answered, the customer will then be directed to a human banker.

Customers were involved in the testing and development phase, with more than 75 per cent saying a virtual banking was a highly desirable offering that would help them with their banking needs.

Part of NAB’s delivery of new customer self-assistance also includes walk-through tutorial videos for NAB Connect users. The short step-by-step videos help customers understand how they can use and take advantage of the platform’s wide capabilities, with tutorials that help with common tasks like ‘adding users’ or ‘setting up reoccurring payments’.

The initiatives are just two examples of the many that have been developed by NAB’s Customer Journey teams, who are reimagining specific customer experiences.

“We currently have a number of different streams of work underway with almost 1000 employees across various areas of the bank – from bankers, to product specialists, marketing experts and technologists – working together on these projects and delivering at pace,” Mr Cahill said.

Hear from NAB’s EGM Business Transformation Anne Bennett talking NAB’s new Virtual Banker

CBA CEO apologises to brokers

From The Adviser.

Ian Narev, the outgoing chief executive officer of the Commonwealth Bank, has apologised to brokers for some of the “uncertainties” it has caused.

Speaking at Aussie’s biannual conference on 28 August, Mr Narev touched on the changes in credit policies and rates, etc., following regulatory changes on certain segments of the home lending market, as well as the “difficulties” the bank has had in implementing them.

Mr Narev said: “Given this is the first time many of the banks have got used to things like investor home loan [changes] and interest-only caps, the transition to these caps has been difficult and has caused a little bit of uncertainty for people in this room that we’re really sorry about. And we acknowledge it.

“I think that we are in an environment where there is still good lending to be done, but it will probably just be a little bit calmer than they had be, and that is probably a good thing.”

The CBA CEO also emphasised that it was “very committed” to the broker channel, but understood that there was “ongoing work” that needed to be done.

Noting the completion of CBA’s purchase of the remaining shares in Aussie last week, Mr Narev said: “I think the key is, we bought Aussie (initially the third ownership in 2008 building up to today) because it is such a successful business under its current business model and we don’t want to change it.

“John [Symond] has said that the key to Aussie’s success has been its independence, customer focus, not being tied to any particular bank, so we’d be crazy to change that. So, it’s more of the same, more successful. So as John says, we [can] step back from it and let it continue its great momentum.”

Brokers are “good for customers”, said Mr Narev.

He acknowledged that while the bank has “never shied away” from wanting to do its own business through its branches and direct channels, using a broker was “good for customers”.

He said: “A large number of Australians want to go through a broker, and that’s why we deal with brokers and have a relationship with Aussie, because it’s good for customers. And we’re very committed to the channel. We understand that as part of that, there is ongoing work and investment that we need to do in our processes to make it easier to deal with us, and that’s something we listen to very carefully and we aim to continuously improve, because you have to be good at it to be competitive in the channel.”

The CEO CBA continued: “Ultimately, you want your proprietary channel to be as good as possibly can be and your relationship with the brokers to be as good as it can possibly be, and let the customer make the choice. And at the heart of this, in my mind, is making sure you’re customer-focused and help the customer in whatever way he or she wants, whether that’s through our branches or website or through a broker.”

Mr Narev later told The Adviser: “We didn’t buy the [Aussie] business only to sell it; we bought it because we have a great relationship with Aussie. We see it as strategically important, so there is no change as a result of the change in ownership.”

‘Trust in the bank has weakened’

Speaking on the morning of the announcement that APRA was to hold an independent inquiry into the bank’s “governance, culture and accountability frameworks and practices”, Mr Narev conceded that “trust in the bank has been weakened”.

He said: “What APRA has announced this morning is that it wants to take an independent look into a number of frameworks in the way we manage business in certain ways. [It comes] in the response to the fact that, over recent times, trust in the bank has been weakened. That is undeniable.

[But] we’re very confident in the practice of the Commonwealth Bank, and we’re also very confident that we’re all focused in the right direction…. The reality is that in the modern world, the public needs confidence and therefore APRA has obviously made this announcement that it wants to hear from some independent people as to how the bank is going versus hearing form us. That has our full support and cooperation.”

Mr Narev continued: “What we can see here is a very strong, highly respected prudential regulator, APRA, saying that, in order to make sure public confidence is as high as it can be, let’s have an independent process … where people can [hear from] voices other than the voices inside the banking system.”

He added: “We welcome it, and we think APRA is the right body to be administering that and we will be fully cooperative.”

When asked about whether he believed that there could be any reputational damage to Aussie brokers, as a result of some of the negative press circulating about CBA, Mr Narev emphasised that while CBA owned the company, Aussie was independent.

He said: “People here work for Aussie … nothing changes. But recognising that Commonwealth Bank is the owner of Aussie home loans, we know that people have an interest in us.

“What we can tell people — and make sure that people are very clear about — is where we have made mistakes, we will put them right…. And what people here can have confidence in is that we have a long-term view of the business. We will manage it for the long term, build trust, strengthen reputation and do whatever we can to make sure that Aussie is successful as its always been.

“As an owner, our sole goal is to keep the business successful as it has been, and the logic tells me to keep it going as it’s been going.”

Chairman of Aussie John Symond also publicly gave his backing to CBA at the conference.

When asked his thoughts on the potential negative reputational impact CBA could have on brokers, Mr Symond said that he obviously felt “disappointment” but added that bad things do happen.

Noting that he was not privy to the details of what has happened or what is going to happen, he said that he remained a “huge supporter of the Australian banking system”.

He added: “I believe in the Australian banking system going forward and obviously have a close association with Commbank. I’m confident that they have the people, the skills, the belief, the vision, the culture that whatever crap’s happened, they’ll fix it.

“Do we like what’s happened? Obviously, no. But they will fix it.”

CBA hungry for broker business

From The Adviser.

Australia’s biggest bank could be making an aggressive play to win broker business after losing a significant amount of home loans through the third-party channel in recent months.

While its biggest rivals NAB and ANZ have been steadily increasing their share of broker-originated mortgages, major lender CBA saw its third-party flows drop by 8 per cent over the 2017 financial year.

The fall was more pronounced in the second half. For the six months ending June 2017, brokers wrote just 38 per cent of new home loans for the retail banking services, down from 46 per cent on the prior comparative period.

Regulatory measures to curb interest-only lending, introduced in March, have been a key driver. However, one Sydney broker believes that CBA is now back in business.

FirstPoint broker Chris Pryer told The Adviser that the major bank is marketing “some very competitive rates” at the moment and appears to have streamlined its third-party services.

“I know there are some other lenders with sharp fixed rates out there at the moment, but CBA are matching them, if not bettering them,” Mr Pryer said. “They are also giving large discounts on variable rates.

“Their turnaround times are still within 24 to 48 hours. We spoke to them this week, and by the sounds of things they are very much back on. They have delivered on the deals we have given them so far.”

Earlier in the year, CBA used brokers as a lever to control its interest-only mortgage volumes following instructions from APRA. For a period of time, CBA stopped refinancing investor mortgages through the third-party channel. Any CBA customers with an investor home loan looking to refinance would have to visit the bank directly.

The management of regulatory caps is now creating some interesting dynamics in the home loan market, such as price discounting, to win more business and rate hikes to cool demand.

“Different banks are turning the tap on at different times when they get their back office in order,” Mr Pryer said.

Liberty Financial buys National Mortgage Brokers (nMB) from Aussie Home Loans

From Australian Broker.

Leading non-major lender Liberty Financial announced today the acquisition of wholesale aggregator National Mortgage Brokers (nMB) from Aussie Home Loans, effective 2 August 2017.

“We have tremendous admiration for nMB which, under Aussie’s ownership, has grown to a team of over 400 brokers and a loan book of almost $14bn,” James Boyle, chief executive of Liberty, said.

“Liberty has successfully developed a thriving retail distribution channel, Liberty Network Services, over the past five years. The acquisition of nMB expands our distribution capabilities and creates unique growth opportunities for both organisations.

“There is a strong alignment of vision and values, with both nMB and LNS focusing on their distinctive value propositions which share a commitment to providing the highest quality of professional mortgage broker services to consumers,” Boyle said.

According to nMB managing director Gerald Foley, “nMB has constantly evolved since our inception in 2001 and I am excited about the depth of resources that Liberty can bring to our fast growing business. I look forward to continuing my leadership of nMB and I would also like to thank Aussie for its support since it acquired the business in 2012.”

Chief executive officer of Aussie, Mr James Symond, said “nMB is one of Australia’s longest established mortgage aggregators and a genuine leader in the wholesale aggregator market. While nMB has been a very positive contributor to the success of the Aussie Group, the future of Aussie’s long-term strategy is to concentrate solely on our own branded distribution footprint.

“Liberty is a long term partner of both Aussie and nMB and I am confident that it is the right business and leadership team to facilitate nMB’s next phase of growth.

“Aussie will retain its strategic partnership with nMB for many years to come and we wish them well as an important part of the very successful Liberty group,” Symond said.

Who Would Be Affected by More Banking Deserts?

From The St. Louis Fed On The Economy Blog.

Although technology has made it easy to bank from almost anywhere, personal and public benefits are still derived from bank branches. In areas without branches—commonly referred to as “banking deserts”—the costs and inconveniences of cashing checks, establishing deposit accounts, obtaining loans and maintaining banking relationships are exacerbated.

Banking Deserts a Growing Concern?

The closing of thousands of bank branches in the aftermath of the last recession has intensified societal concerns about access to financial services among low-income and minority populations, groups that are often affected disproportionately in such situations. The number of people stranded in areas devoid of bank services would probably expand in the future if branches continue to close.

From this perspective, available resources may be better spent trying to prevent more deserts than trying to repopulate existing deserts with new branches.

What Areas Are at Risk?

In the figure below, we isolated branches that were outside the 10-mile range of any others. That is, we found branches that would create new banking deserts if closed. Our analysis is based on demographic and economic data collected for the county subdivision in which each branch is located.

Banking Deserts

We identified 1,055 potential deserts in 2014, of which 204 were in urban areas and 851 in rural areas. The urban areas had a combined population of 2 million, while the rural areas had a combined population of 1.9 million.

These potential deserts have relatively low population densities of 26 people per square mile in urban areas and 12 people per square mile in rural areas. Comparative densities outside potential deserts are, respectively, 176 and 26 people per square mile. In other words, areas with dispersed populations are more at risk of becoming a banking desert.

Potential Effects of New Banking Deserts

Median incomes are $46,717 in potential urban deserts and $41,259 in potential rural deserts. This suggests that any desert expansion would affect lower-income people more than higher-income people.

Minorities constitute 9.8 percent of the population in potential urban deserts and 4.0 percent of the population in potential rural deserts. Both percentages are lower than those for existing deserts and nondeserts. This suggests that newly created deserts may not disadvantage minorities to a greater extent than existing deserts do.

Branches in potential deserts are small, with median deposits of $23 million in urban areas and $20 million in rural areas. They tend to be operated by small banks, with median total assets of $776 million in urban areas and $317 million in rural areas.

The small size of these branches and the banks that own them suggest that what stands between a community and its isolation within a new banking desert are not the decisions made by big banks with a national footprint but, rather, the decisions made by locally oriented community banks. Additionally, potential deserts are more likely to be located in Midwestern states.

The Majors Are Divided On Brokers

From The Adviser.

The Sydney-based majors (CBA and Westpac) have a very different view to their Melbourne competitors (ANZ and NAB) when it comes to third-party distribution. CBA and Westpac’s move away from brokers is no secret. It’s been well documented: reported by Morningstar and called out by AFG.

There are a number of different reasons for why this is happening. For a start, both CBA and Westpac have traditionally held larger investor and interest-only books than NAB and ANZ, and larger proportions of each — brokers are a convenient lever for slowing the growth in these portfolios.

It’s more likely, however, that these banks simply aren’t as keen on brokers as ANZ and NAB. Paying for huge branch networks (a fixed cost) that are underperforming while also paying for third-party originations (a variable cost) rubs some CEOs the wrong way. Particularly as they scramble to meet ever-increasing capital requirements and — more importantly — produce profits for shareholders.

What about the customer?

In a recent interview with The Adviser, CBA chief executive Ian Narev said that while the broker network “provides a really important proposition that customers like and want” and will be a “critical part of the group strategy”, the “preference” was for customers to go through the proprietary channel.

He said: “[O]ur preference is always going to be, as you can imagine — for all sorts of reasons — to service as many of our customers through our own channels as we possibly can. That’s a strategic priority for us.”

Meanwhile, Westpac chief executive Brian Hartzer told The Adviser in May that while the bank has “no issue” with brokers, its branches are a priority: “We want to do better in our proprietary channels. We know that customers like to come directly to us online. We know that customers like visiting our branches and talking to our people.”

Compare this to ANZ’s strategy. Last year’s JP Morgan Australian Mortgage Industry report found that despite being the smallest of the four majors in the domestic mortgage market, ANZ has been successful in achieving the same dollar growth in mortgage balances since 2010.

“We believe a key driver of this result has been the success ANZ has had with the broker channel, with originations rising from ~40 per cent of flow to ~50 per cent of flow since 2010,” the report said.

Critically, JP Morgan found that ANZ has been steadily reducing its branch presence since 2011.

“ANZ is in the unique position where it has consistently grown its loan book above market for the last [few] years at the same time as it is actively reducing its branch presence and increasing its broker presence,” former JP Morgan banking analyst Scott Manning said.

“That is acting as a bit of a business case potentially for other banks to follow,” he said.

Like ANZ, NAB saw the writing on the wall and has made significant investments in the mortgage broking industry. Last year the group launched its Broking for Life campaign, along with an overhauled product suite, in an effort to take advantage of the growth in the third-party channel.

Speaking to The Adviser at the time, NAB’s Steve Kane explained why the group is banking on brokers.

“We did it on the basis that customers are going to brokers, they’re going to continue to go to brokers in ever-increasing amounts. If we don’t provide the right service and the right opportunity for those customers to deal with us through the broker, then… it’s not so much how much more we will get; it’s how much less we will get.

“It’s as much a defensive strategy as it is an acquisition strategy. It’s just the right thing to do. If we truly believe in the broker channel, and we do, then we had to show that, not just talk about it.”

Right now, there appear to be two distinct camps of major banks, separated geographically but also by their third-party strategies. One in Melbourne (ANZ and NAB) and one in Sydney (WBC and CBA). Together they hold around 85 per cent of the mortgage market. On most big issues the majors are generally in unison. On brokers they are now divided. They may even have different views about the future of broker commissions.

In an environment where big decisions are being made around broker remuneration, this is a great outcome for industry. If the big four were moving together as a unit, like they have on other matters, then things could get ugly. But they’re not.

The broking industry has effectively divided the majors — a significant development that could deliver some very positive outcomes for competition and policy setting if it continues.

Suncorp announces new partnership with rediATM network

Suncorp has today announced it has entered a new partnership with Cuscal Limited, owners of the rediATM network, to significantly increase the number of direct-charge-free ATMs for its customers.

Suncorp CEO Customer Platforms, Gary Dransfield, said from 1 August, 2017, Cuscal Limited will become the exclusive provider of Suncorp’s ATMs.

“Suncorp customers will soon have fee-free access to more ATMs, in more locations than ever before, following the announcement of this new partnership,” Mr Dransfield said.

“The agreement will see the number of fee-free ATMs available to customers more than double to 3,300, up from the current 1,600.

“This partnership meets all of our requirements as a business, and is a great result for customers who will benefit from increased ATM access and functionality enhancements across the rediATM network.”

Commenting on the news, Cuscal MD Craig Kennedy said:

“We’re very pleased to welcome Suncorp to the rediATM network. It will make the network stronger and is great news for our 90 plus financial institution members, as well as their 11 million cardholders who have charge-free access to the rediATM network,” he said.

“We’ve been providing safe, convenient, reliable ATM services for more than 30 years and with our recent investment in refreshing our entire rediATM network, we’re looking forward to doing so for many years to come.”