Customer behaviour driving bank changes

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Interviewed by ABC Life Matters’ Hilary Harper, ABA CEO Anna Bligh discusses how changes in customer behaviour, accelerated by COVID-19, are driving changes in banking and banking services.

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TRANSCRIPT SPEAKERS: ABC Life Matters Hilary Harper, ABA CEO Anna Bligh

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Hilary Harper: Anna Bligh from the Australian Banking Association, Anna thanks so much for joining us on Life Matters.

Anna Bligh: My pleasure, Hilary.

Hilary Harper: Now, ANZ customers haven’t been able to access banking services at the post office since early twenty nineteen, ANZ couldn’t come to an agreement with AusPost and now, as we heard from Jill, people in Mortlake don’t have a local bank at all. Is that fair?

Anna Bligh: Well, I certainly feel for Jill and many people like her. There’s no doubt that banking is undergoing a very profound change and change is difficult for all of us, and it’s that transition which we we’re in the middle of at the moment. That’s the hardest, you know, going from what was settled and known into something that’s less known.

But what banks are seeing is a massive shift by customers accelerated, as you indicated, by COVID, wanting to use more and more and more digital channels and using less and less and less cash. We’re now seeing so many people, so many merchants not taking cash anymore or preferring cards and customers who maybe didn’t use them very often or not at all started to use them as a result of necessity in COVID, and they’re not going back.

They’ve found the convenience so much more attractive that they’re not going to move back. So banks having to adjust, they are shifting to where their customers are wanting them to shift. But it does mean that for some people, that transition is very difficult.

“They’ve found the convenience so much more attractive that they’re not going to move back. So banks having to adjust, they are shifting to where their customers are wanting them to shift. But it does mean that for some people, that transition is very difficult.”

ABA CEO Anna Bligh

Hilary Harper: Are they wanting to shift though Anna, is it really those people are wanting to make those changes? A lot of people are saying that shorter closing hours and opening hours in branches mean they have to go online and that banks really push them online. I know the Finance Sector Union is saying that’s what’s happening. It’s not that people are choosing to go online. They don’t have a choice.

Anna Bligh: Well, I’m not sure where they would get that that information from or those allegations. But, you know, Hilary, you started the program by acknowledging that you cannot remember the last time you went into a branch. And I think that would be true for many of us.

You know, I remember, I’m old enough to remember a time when there were no ATMs, and banks closed I think it was two o’clock on a Friday afternoon. You had only those four and a half days to do your banking. If you didn’t get there by that time on a Friday afternoon, you had no cash for the weekend.

Now, you could do banking 24 hours a day, seven days a week, anywhere you want, you carry your bank, for most people now, in your handbag or in your back pocket, you can do your banking, you can transfer funds, you can pay bills sitting up in your pyjamas at nine o’clock at night on a Saturday. And I think many people really value that kind of convenience.

But it’s equally true, as I acknowledged at the beginning, that the transition is not easy. And I think the test for banks is what alternatives they’re providing to their customers and how they’re helping customers make that transition. So, as you’ve acknowledged, a number of banks in Australia and unfortunately for Jill, ANZ is not one of them, but the other three majors, the major regional banks and a range of credit unions all have a contract with the post office, post offices in Australia there are three and a half thousand of them. So it’s a very big footprint. And they provide all of the range of transactional services that most people would want to do most often in a branch, cash a check, deposit money, withdraw cash.

Many banks are also now for some of the things that you do want face to face, such as talking about a home loan or a business loan or a farm loan. They’re actually doing that with home visits out to people directly in their home. Most banks, those that are closing branches are actually moving those staff into their call centres, which was the other trend, which was interesting in COVID, many, many more people who either weren’t allowed to go out or didn’t want to go out because of COVID started using call centres much more and a much higher demand for customers to be talking to someone on the phone. And those numbers of staff have now stayed. So the call centres have got much bigger.

Phone banking still exists. And I understand there are many people who may not feel entirely comfortable about Internet banking, but phone banking, which has been around now for more than 20 years, still exists and is still available to do all those sorts of transactions. And we’ve all learned a lot about video platform.

So, you know, I’m not sure about you, Hilary, but I’m sure lots of your listeners like me and others over the last 12 months have become very familiar with technology such as Zoom video conferences.

I spoke to one of the major banks the other day who said this time last year they had no capability or no product where they could sell a mortgage or approve a mortgage over a Zoom or a video conference platform. And in March this year, they approved 30 per cent of all of their home loan mortgages using one of those video conference platforms, that is how fast things are changing.

Hilary Harper: We saw a lot of indeed, it’s across the board, but there are always going to be people who want to use cash. And we’re seeing ATMs go out too, you were talking about the time when you couldn’t have ATMs and you couldn’t get to the bank on a weekend. There would seem to be this golden moment where we could get cash whenever we wanted. And now I mean, I can get it any time because I live in a city. But what about people who live in in regional and rural areas? Don’t banks have an obligation to offer services within a certain radius or have a certain number of branches available so people do have that option?

Anna Bligh: Well, certainly that is something that banks do take into account when they make decisions about where they will have branches. So in the case of Mortlake, the nearest town with a branch is 20 minutes away. The nearest large town of Warrnambool is 30 minutes away, where I think all banks have a branch.

Hilary Harper: If you drive!!

Anna Bligh: Right in the middle of Sydney, a 20 minute drive to get to your local branch would not be unusual for a number of people. So I do think that, you know, we’ve got to look at it in context. But one of the things I think that is important to understand here, once upon a time in the late 1990s, by the early 2000s, it’s true that many branch closures were driven by a drop in population in small towns. That’s not what’s driving some of these decisions now.

It is profoundly driven by customer behaviour or changes in customer behaviour. So most of the banks, their data shows that about 50 per cent of branches that are closing are in urban areas. So they’re in cities like Melbourne and Sydney. They’re in major regional centres that are growing in population. So it’s not about population decline as it might have once been. It’s really profoundly about customers.

And it’s about 90 per cent of customers are using these digital channels. So it does tell us, you know, ultimately we need banks to be strong. We need them to be investing in new technology for the future. And no business can continue to operate one way. You know, no one is still operating a video store in Mortlake because the people of Mortlake are now signing up to streaming services just as they are all over Australia. So it is their tough decisions.

And, you know, banks try to get that that balance. There are still more than 5000 branches in Australia and almost 10000 ATMs. And, yes, that will decline over time. But you add that to the three and a half thousand post offices. There’s still a lot of physical points of presence. And I’m talking about our mainstream or our more traditional banks.

There are many banks in Australia now that have started in the last 10 years. They’ve never had a branch who will never be opening branches. They are opening as completely online businesses and doing very, very well.

“this time last year they had no capability or no product where they could sell a mortgage or approve a mortgage over a Zoom or a video conference platform. And in March this year, they approved 30 per cent of all of their home loan mortgages using one of those video conference platforms”

ABA CEO Anna Bligh

Hilary Harper: And I imagine they’re doing that because they’ve seen that you can save a lot of money on rents and staff costs if you don’t have the bricks and mortar branches. And I notice that, you know, the culture in the big banks came in for a lot of flack in the Financial Services Royal Commission for being too focused on profit to the detriment of customers. And I noticed that in a podcast called Here and Beyond you told journalist Ray Johnson, ultimately, at the end of the day, Australians will judge you by your actions and not your words. Shouldn’t the banks operate more as essential services and not just as profit making businesses? Because that seems to be part of the issue here. Whether people are saying, look, we need this in our town, I know it doesn’t make financial sense for you as a bank, but it’s important for us.

Anna Bligh: Well, I think that what banks need to do is find the balance always between the best possible services for their customers, as well as maintaining strong, profitable businesses. We all benefited last year as an economy and more than a million Australians individually from the fact that we did have strong banks who did have sufficient buffers, financial buffers, so that they could absorb the shock and defer loans to people who needed it in the middle of a crisis. So I think it’s very important for the economy.

It’s also very important for every one of us individually. You know, Hilary, if you’re if you’re a member of the ABC superannuation fund or any other superannuation fund in Australia, somewhere between 20 and 25 per cent of your superannuation funds will be invested in Australian banks. So I think we all need them for our retirement and the wellbeing of our economy to be strong and to be profitable, but not at the expense of everything else. And that, I think, was the real lesson of the Royal Commission.

So I think you saw a lot of action from banks last year putting customers first. Every bank saw profit drops, saw drops in dividends to shareholders, and took a serious hit to their bottom line in order to make sure that those Australians who really needed help got that help.

“no one is still operating a video store in Mortlake because the people of Mortlake are now signing up to streaming services just as they are all over Australia.”

ABA CEO Anna Bligh

But you said something about what those banks that are online, they’re saving money on bricks and mortar, money is the extent that money is saved, it’s not saved and put under a mattress. It is used to continue to invest in the safety, security and functionality of the channels that more and more customers want to be using. As more of us are going digital, banks have to put more money and invest more money to look after those customers online, to improve cyber safety, to protect them from scams, and to ensure that they’re keeping up with all of the possible functionality that will make banking easier and more and more convenient.

So, you know, it’s a balancing act in any business how much you can invest in new things that will actually benefit your customers while at the same time helping those customers who have to make the transition over a period of several years. As I said, in the case of Mortlake, the nearest bank branch is in a town called Terang, 20 minutes away, and the nearest major centre of Warrnambool is a 30 minute drive.

Now, I appreciate that for some people, that’s not an easy thing. But it would equally be true that even in the middle of Melbourne or Sydney or Brisbane, a 20 minute drive to your bank branch would not be unusual for many people.

Hilary Harper: Anna Bligh, we really appreciate your time on Life Matters today.

Anna Bligh: Thank you.

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