21 September 2023
Hamish MacDonald: A Senate inquiry is examining a wave of bank closures that have hit regional Australia particularly hard. More than 1600 bank branches have closed nationally in the past six years, including 309 in the last financial year. Like post offices and milk bars, bank branches form part of the architecture of regional communities but the banks argue they’re not profitable, and that most customers are turning to online banking. Anna Bligh is the CEO of the Australian Banking Association, former Queensland premier as well as you know. She’s my guest this morning. Good morning to you.
Anna Bligh: Good morning, Hamish.
Hamish MacDonald: Are banks in regional areas really not profitable?
Anna Bligh: This is not a question of profit or non-profitable. This is about where are customers doing their banking, and how are they doing their banking? You know, I think there are some people who are very attached to the way that banks did business in the 1990s. But most customers have jumped into the new world with a huge degree of enthusiasm.
Hamish MacDonald: Most of the time, most, but not all right? You acknowledge that not everyone?
Anna Bligh: Absolutely right, Hamish. But once upon a time, you only had one way of banking, and that was to go physically to a branch. Now you can do phone banking, internet banking, banking on your app, you can have mobile bankers, you can do a home loan on a video conference. So you’ve got more services at more times than you’ve ever had before, whether you live in the most remote parts of Australia or in the middle of a capital city. However, when you’re in the middle of a huge transformation like this, there is always a risk that some people will be left behind. And that’s why banks have got a duty to make sure that they are doing everything they can to ensure that those people who still need some form of face-to-face banking can get it. That’s why Australia’s banks and more than 80 financial institutions pay Australia Post to do a number of banking services face-to-face in their three and half thousand outlets across Australia. So Australia still has a higher number of branches per capita than the OECD, and you add in the three and a half thousand Australia Post outlets, and we’re better served with face-to-face banking than our colleagues in New Zealand and any of the Scandinavian countries.
Hamish MacDonald: There’s a bit in there. But I mean, you accept don’t you that going into an Australia Post Office to do your bank is not the same as going into a bank branch. And speaking to the actual bankers about your mortgage, for example. I mean, it’s just not the same thing.
Anna Bligh: Oh it’s absolutely true Hamish that Australia Post doesn’t provide every single service. But as I said, there are other ways that this is being done. We now have banks that are writing more than 50% of their mortgages online on platforms like Zoom and Teams. Three years ago, none of that happened. This is how fast things are changing.
Hamish MacDonald: Totally understand that. But this is a question about regional and rural communities. And I’m sure as a former Premier, you would acknowledge that actually, the role of a bank in a regional rural community is different to that in the city, because people come into town to go to the bank, that’s where they do their business. There’s something bigger here isn’t there, I noticed that in this Senate inquiry, there’s a lot of reference to social license to operate. And that closing these branches may actually diminish that.
Anna Bligh: I think the obligation is to continue to provide banking services, whether it has to be provided in any one particular form, is a real question mark. And Hamish, I would take it up with you that in fact, two thirds of all the branches that have closed in the last year and the year before that, and the year before that have been in major capital cities, sorry, capital cities and major regional cities. And that’s not because population is declining. In fact, populations are growing in all of those places. It’s because customers are voting with their feet, and going to forms of banking that they find more convenient, and much better suited to their needs.
Hamish MacDonald: Anna Bligh are you saying that we customers are driving this? You make us anytime we need to operate in it or interact with the bank, you’re the ones that drive us online or tell us to talk to a chatbot first or do it over the phone. And it’s not consumers choosing this.
Anna Bligh: Hamish did someone force you to get a banking app? Really? You don’t find that more convenient? You can do your banking anytime of the day now.
Hamish MacDonald: This is not about me. I’m just making the point that there are people for whom they would much prefer to go and talk to an actual person, have a conversation to resolve an issue rather than talk to a chatbot. I mean, to say this is all because it’s what we want as consumers, that’s rubbish.
Anna Bligh: Well, that’s not what the data shows Hamish. You’re absolutely right there was an element of pressure during COVID when people couldn’t leave their homes, and they had to find a different way of banking. What all the data shows is once they tried those new ones, they’ve never gone back. So what we’ve got here, as I said at the beginning, we’ve got a huge transformation underway. And when that happens, it’s tough.
Change is hard for some people, but other people, there’s whole generations Hamish, that have never been into a bank branch. And there are some people who prefer a bank branch. How does the system straddle all of that? We’ve got bank branches, now in some parts of Australia, where they’re doing eight transactions a day with two staff. That’s not a satisfying job for those staff. And it’s not an efficient use of bank resources. But how do we look after those people who need to do those eight transactions, 90% of those transactions are depositing or withdrawing cash that can be done at the post office. In many of the places where it’s closing, some banks are actually looking at what their customers are doing. So they might have an account at a very small branch. But actually, they’re doing most of their banking, their face-to-face over-the-counter banking, at the next nearest big regional town because they’re going into that town for other things as well. And so those banks are actually building new branches in those regional centres, and closing some of the smaller ones. So there’s a reshaping of banking services happening, some of that is investing in new face-to-face, what you don’t get is the new branches that have opened and there have been a number of them. But some of it is in the digital world. And as more customers jump into that digital world, banks need to put investment and resources there to keep them safe, to keep the cybersecurity investments up, and to keep them safe in that digital space. So it’s a tough transition whenever you have a big change like this, but pretending it’s not happening, pretending we can go back to the 1990s is not fair, or sorry, it’s not honest. It’s just not honest.
Hamish MacDonald: I’m talking to Anna Bligh, from the Australian Banking Association. I do want to read you something from the Senate inquiry though. Gerard Rennick, the LNP senator was talking to the Westpac CEO, Peter King. He said you have a social license, given your considerable return on equity backed by the Australian Government. You’re not meeting your social license. I just wonder whether because of the relationship between the Commonwealth and the big banks in Australia, you actually do have an obligation over and above the one that you’re articulating, to actually continue providing these sorts of services in person in remote regional areas of Australia.
Anna Bligh: And?
Hamish MacDonald: That’s the question, do you have an obligation above and beyond because of the support that you enjoy from the Australian Commonwealth?
Anna Bligh: Well, I’m not sure what Senator Rennick from the LNP means by support from the Commonwealth. There were a lot of pretty wild statements made by some of the senators yesterday that I think you should be careful about repeating without thinking about what the facts might be, Hamish. But let me say this, as I said at the beginning, and as every CEO said, at the Senate inquiry yesterday, banks do have obligations to their customers, and they have obligations to provide those services. And how they’re meeting those obligations is investing in a variety of channels.
There are now agribusiness lenders in every bank and every major bank in Australia, who drive out to your property, you don’t have to come into town. They’re actually got mobile lenders out there, going into people’s properties, so that they can do their banking around the kitchen table. To the suggestion that there’s investment being pulled out of regional Australia is just wrong. It’s just that that investment looks different than it did in the 1990s. And I think it is important that banks need to think about where their customers want to be.
As I said, when you’ve got less than half a dozen or less than a dozen transactions a day that tells you your customers are somewhere else and you need to be where your customers are and keep them safe, keep innovating for them, keep making sure they’re getting the best banking services in the world.
But it’s not going to look like it did in the 1990s. Thinking that banking is just about branches is just not where customers are.
Hamish MacDonald: Anna Bligh. Appreciate your time as always, thank you very much.
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