w www.rfigroup.com t twitter.com/RFiMediaGRB
AUSTRALIAN RETAIL BANKER
THE PROBLEM WOMEN IN LEADERSHIP I PAGE 13
DECEMBER 2016 ISSUE
RFi GROUP OPINION
RFi GROUP INTERVIEW
07 A look back and a view forwards
18 Uday Sareen, ING DIRECT
26 Australia to scrap big bank notes
07 13 18
20 23 RFi GROUP OPINION
WOMEN IN LEADERSHIP
RFi ANALYTICS OPINION
07 A look back and a view forwards
13 Kim Jenkins, ARCA
23 The challenge of wrangling multiple stakeholders
RFi GROUP INSIGHT 10 What should banks focus on for mobile banking apps?
RFi GROUP INTERVIEW 18 Uday Sareen, ING DIRECT 20 Lisa Claes, CoreLogic
TRANSACTIONS 26 Australia to scrap big bank notes
30 32 34 36 SAVINGS
PAYMENTS & DIGITAL
28 REST and Acorns partner up for auto portfolio contribution
32 AMEX launches Shop Small Campaign
36 Bank Australia to offer Apple Pay
30 Bankwest launches loan application tracker
34 NAB speeds up personal loan applications
TOP 10 NOVEMBER S BASED ON RFi GROUP'S LINKEDIN PAGE (DAILY STATS FROM 1 NOV 2016 - 30 NOV 2016)
79% of UK savings account holders use online banking to interact with their primary savings account provider
35% of Canadian SMEs have used for business funding in the last 12 months
of banking customers in Mexico intend to borrow more in the next 12 months
45% of aï¬€luent consumers in the UAE subscribe to a priority banking program
Online paym most comm payment us of Indian co
STATISTICS 246 times/year
ments is the mon form of sed by 93% ompanies
Retail banking customers interact 246 times with their main banks on average annually (across all channels) in Vietnam
of banking customers in South Korea prefer to apply for a new current account/savings account through digital channels
47% of cardholders in Japan use their credit card to do grocery shopping
In Malaysia, 48% of total retail banking customers hold a credit card
48% of Australian businesses use a debit card for business expenses
Welcome to the December Edition of the Australian Retail Banker and the last, for 2016. The ARB is a newsletter designed to provide updates on news and trends within the Australian retail banking market specifically in the areas of transactions, savings, deposits, mortgages, cards, personal lending, payments and digital banking. We round out the year quite suitably, with an Opinion Piece by Alan Shields on how his lending market predictions this time last year stacked up, as well as his view on the outlook over the next 12 months. The article is particularly timely given our upcoming annual Australian Mortgage Innovation Summit (23rd and 24th February 2017) and Australian Lending Awards. We hope to see many of you there. The Insight Piece looks at what banks should focus on when developing mobile banking apps. The monthly RFi Analytics contribution authored by Chief Data Scientist, Charles Higby, addresses ‘The Challenge of Wrangling Multiple Stakeholders,’ something I think everyone reading this magazine has faced at one time or another! Our Women in Leadership interviewee is Kim Jenkins, CEO of ARCA (the Australian Retail Credit Association) who I was delighted to speak to on the windown of their incredibly
successful 2016 National Conference. It is a really special interview with some great candid advice for all, so please check it out. This issue’s Thought Leader Interview section highlights Lisa Claes as she takes the helm at CoreLogic and Uday Sareen of ING Direct. Our product news covers Citibank Australia becoming the first completely cashless bank in Australia, the term deposits rise we experienced in 2016, the NAB’s new system to speed up online personal loan applications, CBA and US bank Wells Fargo’s use of blockchain in a global trade finance deal, major Australian banks looking to increase mortgage repayments for borrowers and American Express’s well-known Shop Small Campaign. I hope you enjoy this final edition for 2016 and on behalf of everyone at RFi Group, I’d like to wish you and your loved ones a great Christmas and New Year. Thank you for your support over the past year, I look forward to catching up with you in December and the coming year.
Chloé James Group Media & PR Director +61 (0) 451 790 929 I firstname.lastname@example.org
RFi GROUP OPINION
A LOOK BACK AND A VIEW FORWARDS WORDS ALAN SHIELDS, RFi CONSULTING
his time last year I had a stab at predicting what would happen in 2016 in the housing lending market. I thought that 12 months on, it would be good to have a look back at that prediction and to have another go at predicting what will happen in 2017 in another hotly debated area of financial services â€“ mobile payments.
Despite a lot of noise in the industry, we are yet to see mobile payments truly take-off. - Alan Shields (page 9)
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RFi GROUP OPINION
YoY GROWTH IN HOUSING CREDIT AGGREGATES YoY
25% 20% 15% 10% 5% 0%
Source: RFi Groupâ€™s analysis of RBA data
In 2017 I expect to see YoY growth in investment aggregates rebound to surpass YoY owner-occupied lending growth as lenders turn back on the investment lending tap. - Alan Shields, RFi Consulting
Housing credit growth In November 2015, the housing market was running hot and lenders had been looking to slow down their investor lending under the watchful eye of APRA by differentially pricing their rates. Owner Occupied lending aggregates had begun to pick up, filling the gap left behind by the forced investment slowdown. My prediction was that credit aggregates over 2016 would mirror the growth we had seen in 2015, albeit with most of the growth coming from the owner-occupied lending sector. As the chart below shows, year-on-year (YoY) growth in overall lending aggregates was indeed very similar to that seen in 2015 at 6.3% over the January-September period, compared to 6.7% over the same period in 2015. In 2017 I expect to see YoY growth in investment aggregates rebound (as the trend is already showing) to surpass YoY owner-occupied lending growth as lenders turn back on the investment lending tap. Mobile payments 2016 has seen the introduction and launch of a plethora of mobile payments solutions in Australia. From the bankinitiated ANZ Mobile Pay and NAB Pay to Android Pay,
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RFi GROUP OPINION
CONTACTLESS CARD USAGE
20% 10% 0% Jul-2012
Source: RFi Group
Samsung Pay and of course Apple Pay. However, despite a lot of noise in the industry, we are yet to see mobile payments truly take-off and RFi’ Group’s latest statistics tell us that approximately 12% of all adults have tried using one of the mobile payments solutions available in the market at least once – a total of 2.2 million people. Further, only 54% of these people are using mobile payments once per week or more. So while the payment mechanism is gaining traction, it is not necessarily becoming habitual yet. Obviously the market is somewhat restricted in growth as many consumers do not have a the right combination of smartphone and specific bank debit/ credit card. If we look at the total potential market – taking into account type of smartphone, operating system and bank card holdings – it would be double the current figure at 4.5 million adults but many of these consumers are concerned about security and convenience is also a significant worry. So how will this change over the next 12 months and beyond? When Apple Pay launched earlier this year I felt that it would take until the end of 2017 before at least 25% of all adults had used a mobile payment in-store at least once and I stand by this. I would regard 25% of consumers having used mobile payments to signify a maturing payment mechanism. This would put usage on par with where contactless stood at July
2012 as the chart below shows. The catalyst for frequent usage and increasing maturity of the market will be the hurdling of convenience and acceptance perceptions, something that happened for contactless payments at the end of 2012 when the Coles and Woolworths rolled out contactless terminals. Put simply, mobile payments need their supermarket moment. I’d like to take this opportunity to wish you and your loved ones a very happy Christmas and New Year. Thank you for your support of RFi Group in 2016, I look forward to working with you all next year.
Alan Alan Shields Managing Director, RFi Consulting +61 2 9126 2606 I email@example.com
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RFi GROUP INSIGHT
WORDS AMIT KHAN, RFi RESEARCH
When RFi Group posed the question, if you could improve one thing about your MFI’s smartphone app to consumers, three key responses came out on top – responsiveness, functionality and simplicity in design.
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he use of banking apps in Australia has increased dramatically over the last four years. According to RFi Group data, just 24% of smartphone owners used mobile banking apps in 2012; this has since increased to be closer to 50% in 2016. To an extent this reflects both heightened demand but also that banks have reacted by making significant improvements to their apps over this period. While such improvements are likely to continue, keeping up becomes particularly difficult for the regional and smaller banks in the market (with much smaller development budgets). This begs the question, which features and aspects of app design should banks focus on to get the best bang for their buck? When RFi Group posed the question, if you could improve one thing about your MFI’s (Main Financial Institution) smartphone app to consumers, three key responses came out on top – responsiveness, functionality and simplicity in design. These key themes should not be viewed discretely, but rather in combination. Functionality is important, but not at the expense of design and responsiveness - adding more features is good, but can have a negative impact on customer experience if the app becomes slow or difficult to use.
RFi GROUP INSIGHT
IF YOU COULD IMPROVE ONE THING ABOUT YOUR MFIâ€™S SMARTPHONE APP, WHAT WOULD THAT BE? Coded verbatim responses
25% 20% 17%
Log off button
0% Full Simplified Fingerprint Better responsi- functionality design login veness
Longer transaction history
Live chat function
4 (or 6) digit PIN
Base : All MFI mobile banking users, September 16 Source: RFi Group
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RFi GROUP INSIGHT
WHY DID YOU GIVE THIS SCORE FOR THE BANKING THAT YOU ARE USING? ANZ
Satisfied (8 - 10/10)
Easy Quick Functional Simple
Easy Functional Reliable Fast
Easy Convenient Reliable Safe
Easy Functional Quick Reliable
Easy Reliable Functional
Easy Fast Great layout & looks safe
Easy Secure Reliable
Easy Fast User friendly
Easy Fast Functional
Not easy Too often maintenance
Limited functionality Difficult Crashes
Difficult Not intuitive
Difficult Functionality Login issues
Not satisfied (0 - 5/10)*
Slow Security Difficult to use Functionality
Base : All MFI mobile banking users, March 16 Source: RFi Group
The fact that some of the best rated features allow fast logins reiterates the point that functionality must always be married with a responsive app, which is both fast and simple to use.
*indicates small sample
The above points were reiterated when RFi Group asked consumers to rate how satisfied they were with their mobile banking apps, with a follow up question asking why they gave the rating. The features of functionality, responsiveness, and simple design (covered by customer responses stating the app was “Easy to use”) are consistently repeated as reasons why customers are satisfied with their mobile app. This includes the top-rated mobile banking app in Australia, ING Direct – the drivers of satisfaction with ING’s app centre around ease of use, the app being fast and having a great look/layout. Functionality is cited as a key driver of satisfaction for the CBA app, but this is alongside speed and ease of use. Conversely the top reasons for low satisfaction included the app being slow, not easy, and difficult to use. The importance of a simple design is logical given mobile apps are consistently used for simple tasks. This includes transferring money to friends/family, checking balances and paying bills. More complex tasks such as making changes to products or applying for products are reserved for internet banking or the branch. Aside from this, what are the specific features which resonate with customers? The most desired mobile banking app features include the ability to report a lost card and the ability to change a PIN in app; the features with some of the highest satisfaction ratings include 4-digit login, fingerprint login and quick view of transactions (pre-login). The fact that some of the best rated features allow fast logins reiterates the point that functionality must always be married with a responsive app, which is both fast and simple to use. If you have any questions, please don’t hesitate to contact the RFi Research team directly: RFi Research +61 2 9126 2613 I firstname.lastname@example.org
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RFi GROUP WOMEN IN LEADERSHIP
Kim Jenkins Chief Executive Officer, ARCA
WORDS CHLOÉ JAMES, RFi GROUP
Kim Jenkins the CEO of ARCA (the Australian Retail Credit Association) has enjoyed a varied career, starting out as a marine biologist – of all things! On to banking (more on that not-so-natural progression later), to credit information and now, risk management - at the highest degree. In December’s Women in Leadership interview, Kim explains that for her, her career really has been a case of ‘you get out, what you put in’ and when we meet for this interview, her focus, drive and passions displaying this, are revealed in spades. She opens up with her “huge curiosity”, enjoying the things that truly interest her, the “thorny problems” that are both complex and fascinating, and where solving problems creates opportunities, where she can truly see the potential. She is committed, passionate and quite simply, works very hard! Telling me that “If you work hard and give full commitment you’re going to get far better results than if you’re halfhearted and you cruise along.”
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RFi GROUP WOMEN IN LEADERSHIP
How did you get where you are today and what, or who, has been your greatest influence in business?
a huge opportunity to learn and grow. Everyone has something to teach us - be willing to ask for help.”
In terms of influence, one particular person stands out at a personal level” she notes a fellow South African, Italia Boninelli. “When I was in senior leadership with First National Bank, there was a pilot programme exploring how executive coaching could work for their executive team. Italia, considered one of the leading business women in South Africa, top HR professionals and executive coach, was now my coach, She and I just really clicked and I learnt so much. The benefit of working with a coach is you see things through a different lens, it opens your eyes and, if you really engage, you learn a lot about yourself. Italia and I became very close friends, wekeep in contact to this day. We even reverse a little bit every now and then, with me giving her advice! Italia would never give me answers, she’d only ask me questions and challenge me to consider different perspectives, she has absolutely been one of my greatest influences.”
What is the driving force behind your career goals/ aspirations?
Kim continues to the importance of being willing to take chances, and, if you play it safe, it’s unlikely you’ll progress very far, always keeping in mind that although you need to stretch yourself, she is not referring to wild gambles, but, knowing more or less what your limitations are and finding the balance in between.
Through my career, I’ve also found that if you’re not willing to ask for help you will limit your career. “Through my career, I’ve also found that if you’re not willing to ask for help you will limit your career. You have to be comfortable and confident enough to say ‘please give me a hand’ and not only from those more senior and experienced than you. Quite often that might be asking a junior member of your team, because they’re better at something. If you’re not big enough to say that you don’t know everything, you’re missing
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Kim explains that, although there came a point when she started planning more, up until then, she really went where opportunities presented themselves. As mentioned in the forward, she was a marine biologist, and when she left school - she laughingly tells me - was categorically ‘never going to go into business! Business was boring... or so I thought ;)’ “I wanted to be a marine biologist, I absolutely loved it and am still passionate about the oceans and diving today. The problem was, I found I was too young and inexperienced to think about the right questions to be asking. I think as a scientist if you can’t figure out relevant questions, then what’s the point of the science? So, I decided I needed more experience, which put me on the road to work for the World Wildlife Fund, managing The Green Trust, sponsored by Nedbank. That is what really brought me into contact with business and I realised it was a really interesting world. After I’d been with The Green Trust for about 5 years, the COO of the bank said ‘you know what, it’s time for you to join us’ and I was intrigued. They supported me to complete my MBA, amongst other key foundation building blocks on which my career sits.” Kim describes the first few years working in banking as opening her eyes. During these years, she went where her career took her, until she decided she wanted international experience, to open her horizons beyond South Africa. “South Africa really was, and still is, a long way away. Separated historically, politically and geographically, I wanted more exposure. At the time, FirstRand was actively exploring international expansion opportunities so I put my hand up and said, ‘I want an international role” and volunteered myself. This took me to India as Executive Director of FirstRand India
(since I was, initially, the sole employee, that’s a fancy title for “roll up your sleeves and get it done”) and from that point onward I’ve always thought ‘ok, what’s next,’ really thinking about what specifically interested me, what skills and capabilities I had and what development experiences I needed to move forward.”
I think it’s important to think about careers on many different dimensions – people often think in terms of seniority, which is really only one small dimension and can lead to a resume that lacks diversity. “I think it’s important to think about careers on many different dimensions – people often think in terms of seniority, which is really only one small dimension and can lead to a resume that lacks diversity. What led me to ARCA was very much part of that journey. Moving from a C-suite role at an ASX 200 company seems counter-intuitive but, in leadership, when you begin, you move from managing yourself, to managing a team, ultimately, you’ll influence at a divisional level, then, a company. ARCA is an opportunity to influence and make an impact at an industry level. It’s about learning and growing along a continuum and at different levels.” Have you ever made a business decision you’ve regretted and can you share it? “I don’t think it’s possible to live a life without regrets and I don’t think it’s possible to be in business, without knowing you could have done something differently, and better! I’ve made so many mistakes (but hopefully not the same one too many times)!” she laughs. Kim reveals that if she looks broadly, these occasions where she feels she could have done something differently have very much been more the nature of the decision, rather than the specific decision itself, and specifically, when
RFi GROUP WOMEN IN LEADERSHIP
There are companies that improve the world we live in, the lives of people, the environment and those are the ones that appeal to me. For some people, being in a safe place which provides job security is all they need, some need more of a challenge; recognising what gives you satisfaction and choosing roles where you will find this satisfaction is a very good way to live and a great way to set yourself up for success.
hesitating to do what was needed because of the implication of her decisions. “The more senior you become, the more you find decisions become more complicated and increasingly you find yourself faced with choosing between alternatives which all have downsides and you’ve got to manage that as well as you can. Sometimes people’s lives are effected, their jobs, their security, big things. What I have learnt and what I have regretted is when I’ve taken too long to make a decision, it’s very seldom things get better - delaying the inevitable is never a good thing. It’s not about being hasty, but it is about having the courage of your convictions - if you fundamentally believe you are right, then be willing to accept the consequences if you’re wrong. I now always try to keep that in my mind, to do what I think is the right thing to do and manage the implications of that decision.
It’s not about being hasty, but it is about having the courage of your convictions if you fundamentally believe you are right, then be willing to accept the consequences if you’re wrong. A leader I worked with used to say ‘Run towards a problem’ - it’s simple and effective advice!”
And, what would you say is your greatest professional achievement to date?
level – well, we all saw the massive impact of the GFC”
“There a lot of things that I’m proud of; when I can look back and know I’ve left a company or a team stronger than when I joined, that for me is always great. Also, the positive things that have been said when I’ve been leaving are so humbling, especially when it’s not just peers or superiors but people through the breadth and depth of the organisation, hearing ‘you’ve made a positive impact’ that gives me huge satisfaction.”
What do you do to keep evolving your career, to ensure fulfilling and successful longevity?
The clincher… Kim does divulge that her ‘greatest’ achievement hasn’t happened yet, as it will be when Australia has Comprehensive Credit Reporting as a living, breathing reality. “It won’t be a personal achievement it will be an industry achievement and one that I will have played a small part in but will be the result of a considerable amount of commitment and effort on the part of many people – not an insignificant number of which have been involved in this journey for a lot longer than I have. It’s been such a long road and fundamentally, the drive to make Comprehensive Credit Reporting a reality is for a good reason. It enables lenders to meet their Responsible Lending obligations and make sensible credit decisions that have an impact at a personal, systemic and macro-economic level, and I am passionate about that. At a household level, there can be few things as stressful and destructive as over-indebtedness and at a nationwide
Kim explains to those who do seek a different career trajectory, you have to think, ‘what are the skill-sets you already bring? What’s the diversity of your capability, your experience and what are the things that make you satisfied? When you look back at your career - at the end of it - what do you want to look back at and see to feel satisfied? And, what kind of life do you want to lead?’ explaining one should absolutely consider this, when deliberating the choices they make. “Don’t chase money, don’t chase prestige, the title, the car… those things are not relevant. Think about the content of the role, the learning opportunities, the changes you’ll be able to make, who you’ll be working with and what you can learn from them. For me it’s becoming increasingly important that the job I do has to make a positive impact. In fact, the last two roles I’ve had, I feel like I’ve really been fortunate in working for companies where knowing that, if we’ve done our jobs well and effectively, we could actually make the world a better place. There are companies that improve the world we live in, the lives of people, the environment and those are the ones that appeal to me. For some people, being in
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RFi GROUP WOMEN IN LEADERSHIP
I think being happy is important. Not happy in the frivolous sense, but in a lightness of spirit and a sense of contentment that feels ‘I’m happy with my life’. It doesn’t mean that everything’s perfect, we feel like we should have it all and everything must be perfect, which in my opinion isn’t true. Being happy doesn’t means you’ve got it all, it means being happy with what you have got.
a safe place which provides job security is all they need, some need more of a challenge; recognising what gives you satisfaction and choosing roles where you will find this satisfaction is a very good way to live and a great way to set yourself up for success. What could be worse than getting a whole lot of experience at something you don’t really enjoy and in a career that you don’t love?” I have to agree! How do you achieve a work / life balance and what activities do you participate in outside of your working life, that you see contributing to your business success? Kim openly tells me she finds it quite difficult to switch off. When she’s in, she’s all in, and there’s a downside to that because you run those batteries flat… I know how she feels and can very much relate! “For me it’s varied, if I don’t get a good night’s sleep I’m absolutely useless. I also need to do things that satisfy my soul, as well as my intellect. Ideas fascinate me, but that’s not enough to feed my soul. As I’ve mentioned I love diving, I love underwater photography, and feeling a connection with my local community.” Kim lives in the country, about two hours (each way!) from her office in Melbourne’s CBD, telling me she is happy to do that, because, simply, she needs to.
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“People are real in the country and I’m very passionate about local, sustainable communities and agriculture. I think that as the world has grown and developed, we’ve become so removed from where our food comes from, that we often don’t even know what it is any more. I buy chickens I can see, I know exactly how they live, things like that matter to me, as does being part of the community, I find it so fulfilling. This is probably unexpected, but I also make cheese, and when I retire I want to be an artisan cheesemaker!” There are so many facets that make up Kim Jenkins, peeling back behind the CEO mask I see she loves to keep a busy mind, engaged, engrossed and grounded. It’s where she came from (growing up on a small farm outside a small university town in South Africa), it makes sense to her, the fully immersive experiences (diving, living in country Victoria, cheese making) appeal to her, because they occupy her total mind, and she stops running for a while and recharges the batteries. Do you mentor others? And, what have you learnt in the process? “I think any good leader, and any part of leadership, must include mentoring as an inherent part of what you do. I find it rewarding and enjoyable at a personal level and love seeing others thrive, flourish and succeed. You really do learn so much when talking to someone about their choices, their plans, and especially when talking through their problems,
it’s very hard not to think – I should probably apply this advice to myself! It’s a great opportunity to hold up a mirror.” What advice would you give to young women who want to succeed in the workplace? “I feel the only difference for young women versus young people in general is that I think young women might tend to doubt themselves more than young men have been trained to, or inherently do. They might be less willing to take risks and chances, extend themselves and put their hand up and say ‘I can do that’ even if they’re not 100% equipped for the role yet (not as often the case in young men). For me it’s the basic principal of; have confidence, believe in yourself, don’t be afraid to put yourself out there, it’s far better to try something and fail, than to never have tried, lived a very safe life, yet feel unfulfilled at the end of it.” I ask Kim about her children, coincidentally, a daughter and a son and her impressions of their behavior when it comes to making choices, and taking chances - her answer is an intriguing one. “Personality is certainly a big part of it but I’m intrigued by the impact that parental role models have on children. There’s of course, the standard model that the dad has the primary career and the mother has the secondary career, which, naturally leads sons to think
RFi GROUP WOMEN IN LEADERSHIP
they’re going to be the wage earner and the daughter to the wage supporter. Well, my husband is quite a bit older than I am, he had a very successful career in banking and when we got married and had two children, we were both these crazy, busy executives and decided that one of us needed to be more involved as a parent, because we felt we were outsourcing raising our family. The decision came, and he took retirement in his mid-50’s when our children were very small, my son was only 18 months when my husband retired. When they were really little – and we always laugh about this story - we were watching them both on these tiny little plastic scooters, they were about 3 and 5, my daughter called out “Bye! I’m off to work” and my son called out “Bye, I’m off to golf!” and we laughed, it showed the impact of parental role modelling! My children both have a strong view of what they want to do which I honestly think is more linked to personality, than to what Ken and I have done, but we’ve had an influence. What I will say is that as parents we need to be very cautious about the messages we send and, in my opinion, that message should be… ‘Do what’s going to make you happy.’ At the end of the day I want my children to be happy, I don’t want them just to be “successful”, I want them to be happy. Don’t apply judgement to whether that’s a ‘good enough’ thing to be doing or not.” I am not yet a parent, but really do love these words. Success, by definition, is supposed to fulfill us and at a certain level it does, but, Kim and I agree, there isn’t a direct correlation between success and happiness. Kim continues, and I have to agree; “If had to choose between the two – I’d choose happiness every time.” “My husband laughs and says I’m an ‘eternal optimist’ but I think being happy is important. Not happy in the frivolous sense, but in a lightness of spirit and a sense of contentment that feels ‘I’m happy with my life’. It doesn’t mean that everything’s perfect, we feel like we
should have it all and everything must be perfect, which in my opinion isn’t true. Being happy doesn’t means you’ve got it all, it means being happy with what you have got.” What do you see as the biggest challenge for future generations of business women? Kim gives me a unique and brand new answer, to a question I have asked many times before.
For men and women, I think they are the same. That being the enormous amount of disruption to the status quo of careers, roles, jobs and industries from automation and robotics. “For men and women, I think they are the same. That being the enormous amount of disruption to the status quo of careers, roles, jobs and industries from automation and robotics. Up until this generation it’s never really been an issue, you decide whether you’re going to be an accountant, a chef, a lawyer, a teacher, a doctor, an artist, whatever it is, then you go to university/ trade school and you learn your craft - but that’s not safe anymore! I’m looking at the way the world has changed, is changing and really wondering how I guide my children, help them think through what sort of career they want, based not only on what they’re good at and what they love, but also and perhaps most importantly in this respect, what will be there in the future. Thinking differently about that is key. It’s thinking about what do people do, that robots and computers can’t do the same way and rethinking careers on that basis. Honestly, I don’t really know yet, how to advise my daughter and son but I’m talking to them about these issues and how they can think them through - guiding and educating our children on this couldn’t be more important.”
What’s the best piece of advice you have received as a woman in a leadership role that you would pass on to others hoping to get there? “Run towards the problem!” - Pete Mullins, it’s such great advice”, Kim mentions again. “There is another piece from Italia Boninelli. I was discussing a problem I was having with a colleague, asking her perspective in a coaching session, and she said ‘describe him to me, his personality, background, culture, style etc’ and I did, then she said ‘Ok, describe yourself’ and about half way through I started laughing and said ‘I see the problem, we are chalk and cheese.’ He was micro detail, I was big picture amongst many other differences and she explained that the point of the exercise was to highlight that you can’t change anyone else, the only thing you can control, is yourself, how you respond to people and how you interact with others, so take responsibility for how you are behaving, responding and reacting and try to understand from the other person’s perspective why it is that they are behaving, responding and reacting the way they are, to you. Think about how you can modify your interaction to achieve a positive outcome for both of you. That, for me, was one of the most valuable lessons I ever learnt. It’s about locus of control, I can control me, I can’t control him – or anyone for that matter! Learning to take responsibility for me is paramount, and if I do that there’s always a better chance of a positive outcome collectively.” A fantastic interview – professionally, personally, even emotionally, I gained so much. I hope you did too… ARCA certainly has a champion at their helm.
To read the full Women in Leadership series and all past Australian Retail Banker editions, feel free to visit the archive centre on our website.
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RFi GROUP INTERVIEW
Leaders lecture with ING Direct’s Uday Sareen As the bank approaches 20 years in Australia, Uday Sareen, the newish CEO of ING, talks to RFi Group’s Christine St Anne, about his plans to scale up a business on the bank of a bright orange future. Sareen sees “big opportunity” in the Australian market as the business positions to scale up its business and introduce new products. “Compared with the big four banks, we are the lead challenger in savings accounts and mortgages. But with only a 2.5 per cent market share, the Australian market is still a big opportunity for us,” Sareen told an audience at the AB+F Randstad Leaders Lecture in late November.
WORDS CHRISTINE ST ANNE, RFi GROUP
Uday Sareen Chief Executive Officer, ING DIRECT 18 ARB - RFi MEDIA
RFi GROUP INTERVIEW
Sareen began his role with ING Direct in June 2016. However, he was not new to the business. He joined ING Group in 2007 as country head, retail banking at ING Vysa Bank in India. A five-year stint saw him driving the retail bank turnaround through national expansion and the creation of 120 branches. He also worked in Germany as chief strategy officer for INGDiBa and then returned to India in April 2014 as deputy CEO at ING Vysa. The experience has obviously given him a solid platform to discuss his views under the event banner, ‘From start-up to mature bank – how to maintain the edge.’ Sareen claimed ING Direct was essentially a “19-year old fintech” but was also profitable and well-run, giving it flexibility to adapt to a changing environment. A business that is well positioned to move onto its next stage of major growth. The future is orange “As a fintech we can be nimble, so we can now start to really start to scale-up the business. The future is digital, it is orange and it is bright.” Tackling market share in the Australian market won’t be without its challenges. Sareen acknowledged the high concentration in Australian banking and the fact that they are also well managed institutions. “The proof is in the pudding. The Australian banks came out unscathed after the global financial crisis. That doesn’t happen by accident. These banks are obviously well run and well regulated. “However, what surprised me about the Australian market is how concentrated the banking sector is. The four banks are well-run institutions but they are also concentrated in the way they operate. “This provides us with an opportunity to challenge and differentiate ourselves through our customer products.” ING Direct has around 1.6 million customers. According to Sareen, many of these customers are now asking for a greater product range. “Over the years our customers have told us that we would like more products. This will most likely drive more initiatives in product development. It’s time we deepen our customer relationships as we seek to add more clients.” New products in the pipeline include credit cards, ING will also look to tap into the youth market. “This market is another big opportunity for us. We don’t have any focus on that client segment. However, the whole concept about engaging with young adults is more about financial education rather than saving products,” he added. Sareen spoke about India’s experience with “minor savings accounts”. These accounts include features such as discounts to eateries like Pizza Hut but also include information about saving. “It’s more than just debit cards. These products are also about engagement around education. Some banks have these products and this could be a big opportunity for us going forward.” However, Sareen was careful to note that the business won’t just be embarking on product proliferation. It will be about the customer, what they want from banking products and the way they want to deal with their financial institution. In his view, this theme will drive the future of banking.
Beyond banking “Last month, we averaged on a daily basis around 360,000 customer interactions. This was done purely through mobile banking. The bank is now the app. It’s mind boggling. “We now have to move beyond banking and be part of the ecosystem. The ING Orange lion logo now dovetails with the Uber logo and Facebook apps because that’s where our customers are going.” He believes that the institutions who owns the customer relationship will be the one who will ultimately have the primary customer relationship. “We will be driven by what our customers are saying. Wherever our customers are, whether they are on social media or on an ecommerce site, banking must follow. This view will really transcend the traditional thinking of banking we know it.” For Sareen, at the heart of driving customer engagement, is culture and people. He said social intelligence are now the key skills behind an organisation’s culture. “The more we use technology, the more relevant human connection and social intelligence will be. It’s these skills that will drive a lot of who we are and how we work together.” He spoke about his experience running retail banking in India. He realised that it wasn’t the branch tellers or customer relationship managers who had the customer insights, in fact it was the security guards. While earning $125 a month, working ten hours a day, their observations and interactions with customers “gave you a deep insight into what customers are saying.” They told Sareen of problems with ATMs, about walk-ins who were unable to apply successfully at the branch and issues with phone banking. “It’s amazing what human intellect can pick up just through listening to what customers are saying”. He now visits ING’s customer contact centre in Tuggerah (on New South Wale’s central coast) each month to give him a “sense of what customers are saying”. He also believes another key skill will be the ability to collaborate both virtually and across office teams. After 18 years working life, Sareen has now moved to an open office plan. He soon realised “it was not too bad” and recognised the benefits of more fluid collaboration that the new office plan brings. He will continue to equip his staff with skills they need to put the customer first, firmly believing that “ING Direct employees are the microcosm of our customers. Culture is about walking the talk and ensuring decisions are driven by putting the customer first”. ING Direct will also continue with its effective and successful advertising campaign with Australian actor Isla Fisher. Although new to the country, Sareen recognises Isla’s “perky personality and right sense of humour represents the values of our brand.” However, the branding behind the campaign has evolved to put the customer at its centre. “We now have customers who are part of the new advertisements. Our journey with that advertising campaign has now transcended the celebrity and in fact our customers are now overshadowing Isla”. Follow @RFiMediaGRB on Twitter to keep up to date with the latest information and news at RFi Group.
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RFi GROUP INTERVIEW
Lisa Claes Managing Director, CoreLogic
WORDS CHRISTINE ST ANNE, RFi GROUP
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RFi GROUP INTERVIEW
A Class In Growth Strategies Newly appointed in the role to lead CoreLogic; Lisa Claes outlines her ambitious plans for the business to RFi Group’s Christine St Anne. Each Monday morning, seven hundred employees of CoreLogic meet for their weekly ‘stand-up’ meetings. The offices around the country and New Zealand are beamed into the Sydney office. “Scrum masters” keep their various teams focused as each team leader provides a brief update on how their group has delivered on their goals for the week. It encompasses the whole business, from marketing, products, finance to human resources. CoreLogic has adopted Agile management – a process management framework that allows organisations to work in a highly interactive and effective manner. Processes ensure products can be delivered on time with the support of the entire organisation. “The looking back philosophy of traditional executive meetings has gone out the door. In the new agile environment, it’s about delivering on the outcomes,” CoreLogic managing director Lisa Claes said. Operational excellence underpins the CoreLogic philosophy and was a key reason why Claes was attracted to the business. She believes that it is this philosophy that will enable her to embark on “ambitious plans” around the innovation for the business. “Innovation is a lot about operational excellence. You can’t be innovative unless you are an organisation that excels in operational excellence. It is a ticket to innovate.”
Innovation is a lot about operational excellence. You can’t be innovative unless you are an organisation that excels in operational excellence. It is a ticket to innovate. Innovation plans In September, Claes was appointed to CoreLogic to lead its Australian and New Zealand businesses. She had previously worked at ING where she ran retail banking within ING Direct and divisions for ING Australia wealth management business. “As a CoreLogic customer, Claes said, “I was a very happy customer in my old role so I had a bit of a try before you buy. The rigorous hiring process, however, only validated to me what a professional organisation CoreLogic is,” she said. Her background in digital banking will also bring crucial skills to the CoreLogic innovation plans. “We all know that mobile technology is critical in banking. There is a huge appetite to interact via mobile devices and it’s no different in property.” “We are planning to migrate a number of our solutions on the desktop to mobile technology.”
In her previous role, Claes was involved in product development and her experience gave her an understanding of putting the customer at the centre of any development. “Having worked in banking for a couple of decades, products were increasingly becoming commoditised. Price, however, is not the only lever to attract customers. The secret to product development is identifying solutions which solve customer problems. By doing this you achieve deeper engagement with your customers.” Claes also sees the importance of mobile technology in garnering customer loyalty. “A close relative of digital innovation is advocacy. Mobiles make it easy for consumers to conduct business and interact with you brand. “CoreLogic has many happy customers. We need to continue to engage with them digitally and meaningfully so that they advocate for our brand.” Streamlining processes will also be part of Claes’ to-dolist including ensuring the entry points to data gateways. “Customers should be given digital access to our broader ecosystems and we are building to achieve this.” Underpinning all these customer-centric strategies is data and it is another factor why she was attracted to CoreLogic. “CoreLogic has evolved significantly from simply a company providing listed property data to real estate agents. It now provides broad holistic data sets. “The key enabler to all consumer insight is data. CoreLogic provides meaningful data to help customers realiae strategic outcomes. Spearheading an organisation that does this well, really ticked all the boxes for me.” Claes is careful to note that CoreLogic will remain focused on its “bread and butter” business, that is property data. It is after all, the world’s largest property data and analytics company. A broader policy role Therefore, any acquisitions or growth plans will be consistent with the objectives of its core business. CoreLogic’s acquisition of Cordell in October 2015 from Reed Business is in keeping with this strategy. Cordell provides information and data on project activity and building cost information in Australia. She said complementary businesses offer CoreLogic a “crosspollinisation play” that can result in a “harmonious marriage of varied data sets”. For example, through its costing data sets, CoreLogic can now offer data to enable banks and home owners acquire a better understanding of the value of their home following a renovation. If home owners are considering a renovation, data can be used to assess what the value of the improved home will be following such an investment “This equips customers and the banks to better manage their financial outcomes, specifically when making those critical stay or hold decisions”. CoreLogic is also active in the geospatial information space. Its New Zealand business provides a suite of geospatial tools and
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RFi GROUP INTERVIEW
offerings that provides not just geographical data but picture layering which can give predictions on what areas are prone to natural disasters such as floods or hurricanes. As an example, this solution has appeal in the Pacific Oceanic region with the Fijian government becoming a recent customer. “Predictive tools can provide preventative measures and that’s of value. It gives meaning and relevance to consumers and businesses.” Property of course, is etched within the psyche of Australians. In fact, home ownership is typified as the “Great Australian Dream” for many. With property data as its “bread and butter”, homes in Australia worth 6.7 trillion and 5.5 million mortgages worth $1.6 trillion. Claes wants to lead CoreLogic in driving a broader policy debate to home ownership including housing affordability. Claes said, “I am committed to working with the various stakeholders to explore a better way to make home ownership affordable. Every Australian has the right to make the great Australian dream a reality.” She would also like to see a housing minister appointed to represent Australia’s largest asset class and look to take a leadership position on national housing. “The family home is so important to Australians as it is the centerpiece for building wealth for future generations. I believe we need a minister dedicated to the housing sector to bring a voice to the table.” A global lens Besides policy changes, Claes is calling for a shift in the way property is administered. The one-time barrister will use her legal expertise to push for a rethink on the way ownership
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is applied on land titles. It’s a structure that is centuries old. Claes would like to explore how ownership can be revisited. “Given that parents are increasingly supporting their children with their home aspirations, how can we leverage the family balance sheet in a responsible way that allows families to support their children in buying home. This may necessitate a review of how ownership is applied to land titles. This review could extend to how intergenerational wealth is leveraged. Claes’ appointment will give the former CEO of CoreLogic Australia and New Zealand, Graham Mirabito, the freedom to focus more on expanding the company’s international operations. The business had grown substantially. Over the last 10 years, it has grown from 75 to 700 people with 20,000 customers, up from 6,000. As well as real estate, it now has financial services and insurance business units. In addition to the substantial CoreLogic business in the USA, it also has businesses in the United Kingdom, China and India. The focus for Claes of course will be on the local market and New Zealand businesses. In fact, in an earlier interview with AB+F, Mirabito said her appointment will focus on the growth of these businesses, adding that “Lisa has the calibre and expertise to steer the growth of our business. “I find it a great advantage being part of an international group. It really gives you a global lens on the business. Combine that with high calibre people, we have the right blend of strategic thinking with an external focus.” Follow @RFiMediaGRB on Twitter to keep up to date with the latest information and news at RFi Group.
RFi PERFORMANCE ANALYTICS OPINION
THE CHALLENGE OF WRANGLING MULTIPLE STAKEHOLDERS WORDS CHARLES HIGBY, RFi PERFORMANCE ANALYTICS
’ve been thinking about the challenges associated with data definitions especially when multiple stakeholders are involved. These thoughts were prompted by a fantastic presentation by David Binder, a Senior Director at FICO at the ARCA conference two weeks ago. IFRS 9 (International Financial Reporting Standards 9 ) is an accounting standard that replaces IAS 39. Why is it now important to financial institutions? For starters, it is now time critical as compliance with the standard will be required of most financial institutions by January / June 2018. The standard involves modeling of expected loss instead of incurred loss; is forward-looking rather than backward-looking and requires holding capital reserves against total exposure to credit (i.e. credit limits) not just drawn balances. In short with the trillions of dollars in credit involved any changes to provisioning requirements is important.
David Binder did a great job of outlining the core components around EAD, PD, LGD & Provisions. He also touched on the core analytical, operational, business and strategic challenges faced. The challenge he identified as the “Need for collaboration across risk and finance, originations, customer management and collections/recovery” struck a chord with me because collaboration across stakeholders is at the core of the RFi Performance Analytics offer and is something we know to be difficult.
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RFi PERFORMANCE ANALYTICS OPINION
Through David’s presentation I kept thinking back to a similar initiative - BASEL II. The goals of BASEL II were similar to IFRS9. Many of the discussions I have had with those who were intimately involved in BASEL II have indicated that the biggest challenges they faced both locally and in other regions were: • Different interpretations of the definitions and required modeling methodologies across departments, organisations, regulators and geographies • Varying levels of sophistication across departments and organisations for model development • Highly varied approaches for some components of the final model • Different levels of data coverage and gaps in the data by organization, especially in the SME and commercial lending space. The lack of consistency in available data, model sophistication and interpretation across stakeholders for the various parts of the models led to a number of “sub optimal” outcomes. Twelve years of facilitating collaborative data pooling has taught me how incredibly hard it is to overcome these sorts of
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challenges. Trying to get a common set of definitions is hard enough, let alone a common application and approach. One example that springs to mind involved our Mortgage Benchmarking programme. I can vividly recall the discussion at the first meeting almost 10 years ago. We planned to facilitate a discussion to identify common definitions for the data. I erroneously started the conversation by stating that we would begin with a nice easy field that would not be controversial - the Total Number of Accounts. I rapidly learnt that there is no such thing as an easy field to define where multiple stakeholders are concerned. We debated whether to include mortgage accounts that were open but with nothing owing; whether securities with multiple accounts attached should be reported as one or two accounts; and whether accounts that were classified as mortgagee in possession should be included. This is just scratching the surface. After an hour, several cups of coffee and some robust discussion, we achieved a definition that all institutions were comfortable with leaving just enough time left to move onto the second field. The point I’m trying to make is that it is incredibly difficult to
RFi PERFORMANCE ANALYTICS OPINION
achieve consistent definitions and interpretations for anything where multiple stakeholders or institutions are concerned. The challenge is even more acute when data is looked at over any period of time. Systems change and are upgraded, personnel change and the nuanced understanding of definitions and interpretations can be lost. This deep and long-term understanding of the data we use for benchmarking and the individuals and organisations who have provided, combined with the historical data and our systems is a unique proposition for our clients. I consider my team as the most important factor and place a high premium on maintaining the continuity in the personnel involved in our Performance Analytics division. If your organisation is involved in any sort of data-driven initiative involving multiple internal or external stakeholders my counsel is to: • Take the time to debate the definitions. • Try to maintain consistency of personnel through the process. • Try to involve those who went through similar processes in
the past (Basel II for IFRS9 for example). • Before you lock in your models, put yourselves in the shoes of other stakeholders (departments, competitors, regulators, auditors etc) and document as many likely objections as possible for each step, data dimension and approach. • Consider fallback positions to counter any objection. • Try to gain insights into what challenges, data and approaches your peers are facing internally, domestically, and internationally and learn from them. • If there are gaps in your data for specific products or segments, consider ways to fill those gaps rather than just listing them as an inherent limitation. • Document everything in a form that is easy to maintain and understand – ideally with any final output / model / benchmark itself. If you would like to discuss further, please don’t hesitate and contact: Charles Higby Chief Data Scientist, RFi Performance Analytics +61 418 212 99 I email@example.com
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TRANSACTIONS 26 Australia to scrap big bank notes 27 Citibank Australia becomes first bank in Australia to be completely cashless 27 Branch usage falls to five people a day
Australia to scrap big bank notes
ast week, India announced it had decided to remove 500-rupee and 1,000-rupee notes from circulation. India’s decision was spurred on by the country’s need to decrease tax evasion. A study carried out in Australia by UBS has identified it would be beneficial for Australia to follow India’s example. Jonathan Mott, an analyst at UBS, believes, “Removing large denomination notes in Australia would be good for the economy and good for banks.” The advantages of removing $100 notes from circulation in Australia would both help to reduce fraud as well as increase household deposits. UBS’s study found that if $100 notes were removed from circulation and deposited, it would result in a 4%increase in household deposits. Australia is not the only country which is considering removing big bank notes, electronic payments are causing countries around the world to consider whether big bank notes are necessary. Removing big bank notes also symbolises a move toward a cashless society. The proportion Australians who can imagine living a cashless society has continually increased since 2014. In 2016, RFi Group data identified that more than 1 in 3 Australians can imagine living in a cashless society.
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CAN YOU IMAGINE A SCENARIO WHERE YOU WILL EVER STOP USING CASH ENTIRELY BECAUSE ALL OF YOUR PAYMENT NEEDS WILL BE MET BY OTHER WAYS OF PAYING? Yes 50% 40%
20% 10% 0% 2014
Source: RFi Group
Citibank Australia becomes first bank in Australia to be completely cashless From November 24, Citibank will no longer handle notes and coins in its branches in Australia. The decision has been motivated by reduced demand for cash-related services in branches. Citibank Head of Retail Banking, Janine Copelin, says that only 4% of Citbank customers have used such services in the last year. The decision to go cashless at branches reflects the bank’s overarching digital banking strategy as more customers prefer to use digital channels. RFi Group data shows only 25% of customers in Australia visit a branch at least once a month. On the other hand, RFi Group data also shows that 52% of customers use internet banking on their computers at least once a week and 37% of customers use banking apps on their phones at least once a week. Going forward, Citibank Australia customers will need to use ATMs and National Australia Bank (NAB) and Australia Post branches for cash-related services.
Branch usage falls to five people a day RFi Group data shows that since July 2015 there has been a decline in the proportion of consumers who use branches for day to day banking activities, such as transferring money, checking balances and updating personal information. The CEO of Suncorp Bank, Michael Cameron, said that as few as 5 people a day are using a bank to complete banking tasks. Cameron explained, “We’ve seen drops of 30 to 40% happening over a few years, and in some of our traditional bank branches around Australia in some areas we see as little as five or ten people a day, and the economics are very difficult.” In response to the decline of branch use Suncorp Bank will be trialling new concept stores. These stores, much like one opened by ANZ in Sydney, are designed to provide customers with a range of products and services that combine traditional and online banking. In addition, Suncorp Bank wants to include new and interesting services reaching beyond banking such as seminars for card clubs.
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SAVINGS 28 REST and Acorns partner up to allow automatic invest portfolio contributions 29 Term deposit becoming more popular in 2016 29 RBA leaves cash rate unchanged but banks reduce interest rates
REST and Acorns partner up to allow automatic invest portfolio contributions
ccording to RFi Group data 8% of savers identify saving for retirement to be their main savings goal, however the proportion of savers under 35 saving toward their retirement is significantly lower than the market average. In a bid to increase the proportion of younger savers who contribute to their superannuation REST Industry Super has partnered up with Acorns, a financial solutions company which helps users invest their money by collecting â€œspare changeâ€? from daily purchases. The new partnership will encourage voluntary contributions, particularly among younger consumers, by allowing customers to use the Acorns app to electronically transfer money from their Acorns account to their superannuation provider. Six months of fee-free access to Acorns will be provided to REST members who wish to take advantage of the new partnership.
WHAT IS YOUR MAIN SAVINGS GOAL FOR YOUR LARGEST SAVINGS ACCOUNT? Retirement savings - By age 25% 20%
18 - 24
25 - 34
0% 35 - 44
45 - 54
Source: RFi Group
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55 - 64
RBA leaves cash rate unchanged but banks reduce interest rates The RBA left the official cash rate unchanged at 1.50% in its latest review at the beginning of November. Although the cash rate remains unchanged a vast range of banks have reduced the interest rates on their savings accounts and term deposits. Of the Big 4 banks ANZ made slight changes to its Online saver and Online Progress saver products which can now earn up to 2.75% p.a. and 1.91% p.a. respectively. The decision to reduce the interest earnt on savings products was not restricted to the Big 4 banks. Bankwest, for example, cut the introductory interest rate on its TeleNet Saver by 0.25%, to 2.75%. While a number of mutual banks, including Bank Australia and Greater Bank, cut interest rates earned on term deposit products. Despite making cuts to interest rate earned on 1,2,3,5 and 6 month term deposit products Greater Bank increased the interest rate earned on its 4-month term deposit.
Term deposit have become popular in 2016 The most recent quarterly report released by the Reserve Bank of Australia (RBA) has revealed that the demand for term deposits has increased among Australians. Term deposits, like all savings products, have experienced interest rate cuts but the RBA believes consistency is the key to the term deposits appeal. The RBA reported, â€œConsistent with interest rates on term deposits becoming more attractive than other deposit types, stronger growth in term deposits has been observed more recently.â€? RFi Group data, supports the RBAâ€™s findings. RFi Group data shows term deposits are the second most considered banking product among savers who are likely to take out a savings product in the next 12 months. Since March 2016 there has been a 1% increase in the intention to take out a term deposit. Although savers intend to take out a term deposit in the next 12 months, only 6% of savers are using a term deposit as their largest savings account.
Term deposits, like all savings products, have experienced interest rate cuts but the RBA believes consistency is the key to the term deposits appeal.
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MORTGAGES 30 Bankwest launches loan application tracker for brokers 32 Major Australian banks may increase mortgage repayments for borrowers 32 Auswide Bank launches new tracker home loan product
RFi Group data suggests that mortgage brokers exert considerable influence in the mortgage market in Australia. Brokers are the second most popular channel for applicants, with 29% of borrowers using a broker to apply for their home loans.
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Bankwest launches loan application tracker for brokers
ankwest has launched an app that gives brokers and their clients real-time updates on home loan applications. The application tracker provides updates on the application process from pre-approval through to the first repayment made. Furthermore, applicants who provide an email address are also sent email notifications whenever there is an update in the process. Although one of the primary motivations for launching this app has been to help the bank become more digitally engaged with its customers, the bank has also recognised the large influence that mortgage brokers have in loan applications and the need to also increase engagement with brokers throughout the application process. The app notifies brokers of final approval for loans before customers so that brokers can be the ones to inform their clients of the good news. RFi Group data suggests that mortgage brokers exert considerable influence in the mortgage market in Australia. Brokers are the second most popular channel for applicants, with 29% of borrowers using a broker to apply for their home loans. Furthermore, 20% of borrowers cited their brokerâ€™s recommendation as one of the top three reasons for choosing their lender.
WHAT CHANNEL DID YOU USE TO APPLY FOR YOUR HOME LOAN? 50% 43%
Source: RFi Group
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Major Australian banks may increase mortgage repayments for borrowers In order to comply with the Basel III accord, Australian banks will need to meet new capital requirements to fund long-term loans. The Net Stable Funding Ratio (NSFR) requires banks to increase their liquidity by holding more capital than what is adequately required to fund longterm loans. This could eat into banks’ profit margins as a large portion of the capital they hold cannot be lent to customers. To ensure that the cost of holding extra capital doesn’t hurt their profit margins, banks may pass on the cost to their customers. Australian banks could increase interest rates on mortgages or reduce discounts on variable rates next year to fund the costs of extra capital they need to hold to maintain the net stable funding ratio.
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Auswide Bank launches new tracker home loan product Auswide Bank, a small Queensland bank, has launched a new home loan which follows movements in the Reserve Bank of Australia’s (RBA) official cash rate. With an interest rate of 3.99%, the tracker loan has a 2.49% margin above the cash rate. The tracker loan can be valuable for borrowers preferring a variable rate but still wanting assurance that changes in the cash rate are passed on to them. Anytime the RBA changes the cash rate the interest rate on the loan will change equivalently. For example, if the cash rate decreases by 0.25% then the interest rate on the tracker loan is reduced to 3.74%. When the RBA last reduced the cash rate in August the Big 4 banks did not pass on the full 0.25% rate cut to borrowers due to increased costs of funding. However, the amount of interest paid on home loans remains a priority for Australian borrowers. RFi Group data finds that 70% of mortgage holders are subject to variable interest rates, 15% on fixed rate and 14% on part fixed/variable rates. Further, tracker loans would also not offer features that are found in more traditional products such as offset accounts.
CARDS 33 American Express launches Shop Small Campaign 34 Police Credit Union shakes up credit card market with new low rate credit card 35 Flybuys and Velocity partner together by linking their rewards schemes
American Express launches Shop Small Campaign
his November, American Express is running its Shop Small initiative, which gives shoppers the chance to receive cashback offers when making purchases at small businesses using their American Express credit cards. The campaign aims to promote shopping local by giving shoppers $10 back for every $20 spent at small retailers. The offer can be utilised up to 10 times and only once at any given retailer. A recent study run by American Express, found that shoppers are choosing to shop at larger businesses more often, despite many of respondents stating that small businesses have had a positive impact on their lives. The study found that a disproportionate 37% spent more time shopping at small businesses as opposed to larger businesses. The disparity may come from shoppers looking in the wrong places to find small businesses. â€œSmall businesses are no longer just bricks and mortar stores on the high street, but new digital start-ups, online boutique stores, and internet based services,â€? said Katrina Konstas, Vice President Small Merchant, Global Merchant Services at American Express. The Shop Small Map has been created by American Express so that cardholders are able to find participating local businesses.
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RFi Group data shows that the market share of low rate credit cards has remained steady over the past 12 months, and sits at approximately 19%.
Police Credit Union shakes up credit card market with new low rate credit card A new low rate credit card has been launched by the Police Credit Union. The SoLo credit card comes attached with an interest rate of 6.99%, the lowest rate available on the market, and features no annual fees or no transaction fees on purchases. The cardâ€™s cash advance rate also stands at 6.99%, though card holders can expect a small fee when using an ATM. The downside is that while interest costs are lower than other options, the card comes with no interest free days, meaning card holders will be charged interest immediately after using their card. RFi Group data shows that the market share of low rate credit cards has remained steady over the past 12 months, and sits at approximately 19%. The positives and negatives of the SoLo card make it a suitable choice for consumers who always carry a balance on their credit card, as they can keep costs as low as possible. Consumers will need to become a member of Police Credit Union before accessing the low rate SoLo card.
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FOW CARD TYPES Low rate credit cards 25% 20%
15% 10% 5% 0% Sep-15
Source: RFi Group
Flybuys and Velocity partner together by linking their rewards schemes Flybuys members are now able to convert flybuys points into Velocity Frequent Flyer points after the two reward schemes announced a new partnership. Members can now collect Velocity points faster by shopping and paying for everyday expenses at flybuys affiliated outlets. “We’ve made the process very simple – link your memberships on our website and transfer points. If you’re not already a member, it’s free to join both flybuys and Velocity,” General Manager of flybuys, Adam Story, explained. Another positive for members is they can now earn Velocity Status Credits on their shopping, and in the process, bump their Velocity memberships into higher membership classes – giving them exclusive perks. These status credits could previously only be earned by buying flights. “This partnership with flybuys means that millions of Australians can get closer to their next holiday by transferring their points to Velocity,” said Velocity Frequent Flyer CEO, Karl Schuster. Members can expect to convert flybuys points into Velocity Frequent Flyer points at a rate of 2,000 flybuys points to 870 Velocity points. That equates to an earn rate of 0.43 Velocity points for every dollar spent, which is the identical to the scheme dealt by Woolworths and Qantas. Woolworths discontinued its rewards agreement with Qantas in October 2015, but recalled it 10 months later after criticism from customers.
Another positive for members is they can now earn Velocity Status Credits on their shopping, and in the process, bump their Velocity memberships into higher membership classes – giving them exclusive perks.
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Jason Yetton, CEO, SocietyOne
PERSONAL LOANS 36 NABâ€™s new system to speed up online personal loan applications 38 New government initiative to help those struggling financially in Queensland avoid payday lenders 38 SocietyOne showing more signs of strength
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NABâ€™s new system to speed up online personal loan applications
he roll-out of new technology which enables staff to process account, loan and credit card applications has resulted in National Australia Bank (NAB) expecting to increase revenue. There is pressure for Big banks, like NAB, to continue their developments in these processes, as online lenders are now competing with approvals that can process unsecured credit within minutes or even seconds. RFi Group data shows that the proportion of personal loan holders who applied for the loan online has been steadily increasing. Since September 2012, the use of online channels to apply for personal loans has doubled, with now more than 1 in 3 having applied for their loan online. Bob Melrose, NAB Executive General Manager of Retail, attests the system has reduced the average application time for personal loans to only 2.9 days. The faster turnaround time between loan application and loan approval is sure to increase the proportion of prospective personal loan holders who would consider taking out a loan with NAB.
HOW DID YOU APPLY FOR THIS LOAN? Applied online
10% 0% Sep-12
Since September 2012, the use of online channels to apply for personal loans has doubled, with now more than 1 in 3 having applied for their loan online.
Source: RFi Group
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New government initiative to help those struggling financially in Queensland avoid payday lenders The Queensland State Government has announced they will open two trial loan stores next year, to give low-income earners a safer alternative to other payday lenders. The announcement of the Good Money Stores came as Communities Minister Shannon Fentiman declared there had been a large increase over the past decade in the number of women accessing payday loans. “This program will provide real alternatives to unscrupulous payday lenders and rent-to-buy schemes to make sure people don’t spiral into debt,” Ms Fentiman said. “This particularly applies to women who are the fastest growing demographic accessing payday loans. Women can be hit particularly hard by financial pressures, especially if they are caring for children or the elderly and their earning capacity is affected by that.” RFi Group data indicates that 8% of borrowers are highly comfortable borrowing from a payday lender, compared to 59% banks. The Good Money Stores will be located in Cairns and on the Gold Coast, and will accompany 29 financial councillors based around Queensland.
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SocietyOne showing more signs of strength Australian peer-to-peer lender SocietyOne was placed in the leading 50 in the 2016 Fintech 100 list. SocietyOne’s CEO, Jason Yetton, believes this is a great result as the company has taken its time to establish itself. “2016 is turning out to be a breakthrough year where we have started to loosen the stranglehold of the big four banks and traditional lenders,” Mr Yetton said. SocietyOne still intends to write at least 3% Australia’s $100 billion personal loan market in the next five years. RFi Group data demonstrates that more than 10% of current lenders would be comfortable borrowing from a peer-to-peer. As a result it is expected that the proportion of Australians turning to SocietyOne for personal loans will increase in the future, particularly when the interest rate being charged in only 8% p.a. compared to big bank which charge approximately 15.5 p.a.%.
PAYMENTS & DIGITAL
PAYMENTS & DIGITAL 39 Bank Australia to offer Apple Pay 40 CBA signs agreement with payment platform Alipay 41 CBA uses blockchain alongside US bank Wells Fargo in global trade finance deal
Bank Australia to offer Apple Pay
ank Australia will now, like several mutual banks and credit unions, offer its customers Apple Pay. Later this month the Australian Competition and Consumer Commission will decide whether the Commonwealth Bank of Australia (CBA), Westpac, National Australia Bank (NAB) and Bendigo & Adelaide Bank will be able to negotiate collectively with Apple to offer their customers Apple Pay. This ability is highly likely to be effected by Bank Australia’s decision to offer Apple Pay. Damien Walsh, Managing Director of Bank Australia, described the bank’s decision as, “Bank Australia is proud to be among the early financial institutions in Australia to offer its customers Apple Pay… Our customers have been asking for Apple Pay and we’re excited to respond.” Bank Australia is trying to make digital payment solutions to all its customers as it also offers its customers access to Android Pay and is expected to offer Samsung Pay if made available.
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PAYMENTS & DIGITAL
WHICH OF THESE FINANCIAL INSTITUTIONS WOULD YOU CONSIDER TO BE YOUR MAIN FINANCIAL INSTITUTION? CBA 50% 40%
30% 20% 10% 0% Consumers born in Asia
Source: RFi Group
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CBA signs agreement with payment platform Alipay CBA has signed a deal with Alibaba’s Alipay that will allow Chinese students and tourists to use Alipay’s platform to make payments in Australia. The deal also enables Australian consumers to make purchases through websites owned by the Alibaba Group. With up to 450 million active users globally, Alipay is currently the world’s largest mobile and online payment platform. CBA Group Executive of Institutional Banking and Markets, Kelly Bayer Rosmarin, says that it is constantly working on payment solutions that add flexibility for consumers, so connecting to a globally leading mobile payment provider is ‘truly exciting’. The continued growth of China’s middle class is promising for the tourism and educational sectors in Australia. According to Tourism Research Australia, spending by Chinese visitors grew by 48% from 2014 to 2015 and it also shows that Chinese visitors accounted for 25% of total spending by visitors to Australia in 2015. The Alipay deal allows CBA to take advantage of lucrative opportunities going forward. July 2016 RFi Group data shows that 35% of consumers in Australia born in Asia have CBA as their main financial institution, compared to 29% of Australian consumers on average.
PAYMENTS & DIGITAL
CBA uses blockchain alongside US bank Wells Fargo in global trade finance deal CBA has used blockchain (the technology behind cryptocurrency Bitcoin) in a deal to facilitate the shipment of cotton from the USA to China. The transaction involved Brighann Cotton Marketing Australia purchasing cotton from Brighann Cotton in the US. CBA and Wells Fargo worked together to transform letters of credit used in the transaction into digital code. It allowed all parties involved in the transaction to monitor the trade in real-time. Once the shipment of cotton reached its location, payment was triggered by a digital contract. The application of blockchain technology in this deal has been praised because it provides transparency for all parties involved in the trade and has reduced the need for physical copies of letters of credit. By automating processes involved in the trade, time and money have been saved. The risk of fraud has been reduced because the letters of credit are difficult to tamper with once they are transformed into digital code. The deal marks a significant milestone in reducing risk of fraud as well as the physical infrastructure involved in transactions between businesses.
The application of blockchain technology in this deal has been praised because it provides transparency for all parties involved in the trade and has reduced the need for physical copies of letters of credit.
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