ABA CEO interview on Sky News Afternoon Agenda with Cheng Lei

E&OE
Interview on Sky News with Cheng Lei

Cheng Lei: Australian banks closed 155 branches over the last year, but the rate of closures has slowed. For the implications, let’s bring in Australian Banking Association Chief Executive and former Liberal Minister Simon Birmingham. Mr Birmingham, welcome to the show – great to talk to you in this new context. We’re trying to prevent financial exclusion. What do these closures mean for the elderly and those who are less digitally literate? How do we help them?

Simon Birmingham: Hi Lei, it’s great to be with you and have the opportunity to speak with you again. These are serious matters. The first point to reassure people of is that branches do remain an important part, that Australian banks are committed to and do see for most of those banks as a key point of access for certain services that are important to Australians.

But equally, we’ve seen this huge shift in the way Australians choose to bank and how they actually operate and that shift has seen over the last five years, a 70 per cent increase in digital interactions that occur by Australians with their banks, alongside a 50 per cent decrease in branch based interactions that occur. So, you can see absolutely the shift that’s occurring. And the data behind that is really quite astronomical in some ways. The last annual reports showed that in terms of those digital interactions, online or app based with people’s bank accounts, they totalled around 17 billion interactions by Australians. Put that into easier terms, that’s the equivalent of every Australian picking up their phone, logging into their banking app twice a day, every day of the year. And that’s pretty remarkable to show just how much more accessible, in a sense, banking is for the bulk of Australians.

But you rightly highlight that there continues to be a need for branches, particularly in terms of the elderly, in areas of disadvantage, helping to solve problems. But again, many of those things will be increasingly addressed through other areas of innovation too over time.

Cheng Lei: Can you mention or give us examples of some good hybrid solutions that combine modern banking convenience with physical presence?

Simon Birmingham: Indeed Lei, you’re increasingly seeing people able to complete, more and more of their mortgage applications online, for example, and then really only need, in some cases, not to provide an interaction with a branch at all, or literally just to provide some documentation of some signing or some witnessing occurring in limited instances. But the narrowing of scope in terms of many of those things that used to be very paper intensive into increasingly digital channels that also can get faster for consumers as well. Provide quicker, faster assessments and hopefully approvals for most people becomes a real benefit too.

So, we’re seeing the change speed up, and we see huge different players entering the sector in the payment system. The rise of global multinationals like Apple and Google, as people use their phones increasingly to pay has become a point of convenience for many Australians but is also indeed drawing more fees away from money that would have gone into supporting the Australian banking system that instead is landing in those multinational pockets. So, these are all challenges that we need to make sure in addressing good policy are addressed so that we can keep that innovation and investment in services that help Australians.

Cheng Lei: Also, in the banking space, we know that Tony Burke has mentioned he wants to look at restrictions of crypto ATMs. What’s the Banking Association’s view on that, in terms of, you know, fostering financial innovation, but also preventing illicit finance?

Simon Birmingham: Lei, we’re really positive and welcoming of the announcement there by Minister Burke yesterday to look at that banning and restricting of crypto ATMs, it’s hard to see any rationale for why people need to feed cash into a crypto ATM there are plenty other ways for those who wish to dabble in the crypto market, for them to legitimately do so. But firstly, there’s really a big consumer warning to Australians if, if you start to get phone calls from people who encourage you to put cash into a crypto ATM, or are convinced by other means to do so, that should be a big alarm bell, because once that cash has gone into a crypto ATM, there’s little prospect of you, your bank, or any other official managing to get it back, because it really does vanish, usually out of the country and into a system that is beyond normal financial markets.

Now, as I said, there are other means for those who want to dabble in, invest in, gamble, in crypto, to do so, but when it comes to everyday Australians, there’s little justification or need that can be seen, crypto ATMs seem overwhelmingly to be used either to propagate scams that see Australians lose money or are used by those engaged in money laundering to enable the profits of crime and illegal actions to be filtered offshore, and making it hard for authorities like AUSTRAC to track that down.

So, we urge the Government and the Parliament to move forward with that legislation quickly, give AUSTRAC those powers to enable them to look at it, and also welcome initiatives that have been running alongside this, in terms of mule accounts that really provide the opportunity for banks to better look at how people might be being tricked into giving others access to their bank accounts. Another common problem in money laundering and scamming that sadly is seeing vulnerable Australians being targeted in ways that we wish to see stamped out.

Cheng Lei: Staying with the topic of cash. We know Armaguard is planning a strike in the few days around the Melbourne Cup long weekend, which may lead to a cash crunch. How do you see that issue resolving itself?

Simon Birmingham: Lei, that issue itself is obviously a matter between Armaguard as a company and the Transport Workers Union and Armaguard’s employees overall, and we wish to see them work through those in a normal manner.

Cash distribution in Australia has absolutely been under pressure. We started the program talking about people using branches less. They’re also using cash a lot less, as is evidenced by the other topics we’ve had in digital transactions, crypto and all those other things happening in the economy, and so that means that the cost of moving cash around the country has grown relative to the amount of cash that is needed or being used in many places.

Banks, alongside other partners, retailers, Australia Post, have been investing and working with Armaguard to provide a sustainable long-term model for that. We’re really pleased with the cooperation there. We’re making strong progress around a new independent pricing mechanism that the ACCC – we hope – will give approval to, to give long term certainty there, we welcome messages from Armaguard and its owners, Linfox, that they’re in this for the long term.

We want to ensure that there’s long term partnership there to make this work, and hopefully that can enable these difficult industrial matters to be resolved with certainty and security for those workers in what is a rapidly changing environment that makes it difficult for the company and for its employees, and that’s why we’ve been making financial contributions and building a sustainable model for the future.

Cheng Lei: And the Banking Association seems to have a different view to the RBA in terms of how the plan to ban credit card payment surcharges will actually benefit consumers. Tell us about that.

Simon Birmingham: Lei, the RBA is in a consultation process at present around some draft proposals, and we welcome very much the decision or approach to ban surcharging that the government has asked the RBA to look at. We recognise that that annoys consumers, and that when people are quoted a price, they expect to pay the price they’re quoted, and look at the conversation again we’ve just had. We’re talking about the cost of moving cash around the economy. No means of payments being processed are absolutely free. There’s costs attached to cash. There’s costs attached to digital transactions, and again, earlier in this interview, I highlighted the fact that more of the fees that happen when you tap your phone to make a payment, more of those fees are actually going into an Apple, into a Google.

Our concern with what the RBA has proposed around those so-called interchange fees is that the way they’re doing it only basically hits Australian banks, and yet the area of greatest growth in those fees is into those foreign multinationals. Now, in fairness to the RBA, they’ve only just got legislative powers to even look at things like digital wallets, and so our urging for them is to actually ban surcharging by all means, but take time in relation to other fee reform, to use those new powers to encompass the role of digital wallets foreign multinationals like Apple and Google, or increasingly AMEX and to make sure that we’re maintaining a payment system that can support investment in innovation in Australia, in Australian banking and products, that’s what’s really critical.

Cheng Lei: Okay, thank you so much for your time.

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