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AUSTRALIAN RETAIL BANKER w www.rfigroup.com t twitter.com/RFiMediaGRB

CEO of Ellevest

RFi OPINION

WOMEN IN LEADERSHIP

ANALYTICS OPINION

08 Digital mortgage origination – Nirvana or nonsense?

16 Reneé Amor, Rabobank AU & NZ

25 Artificial intelligence, machine learning & predictive analysis


CONTENTS

12

08 16 20

22 25 RFi GROUP OPINION

WOMEN IN LEADERSHIP

RFi ANALYTICS OPINION

08 Digital mortgage origination – Nirvana or nonsense?

16 Reneé Amor, Rabobank

25 Artificial intelligence, machine learning & predictive analysis

RFi GROUP INSIGHT 12 Cross-selling insurance – Do the banks stand a chance?

THOUGHT LEADER INTERVIEW 20 Paul Bloxham, HSBC 22 Sallie Krawcheck, Ellevest

TRANSACTIONS 28 Digital experience most important to customers


CONTENTS

28 32

34 38 40 44 SAVINGS

CARDS

PAYMENTS & DIGITAL

32 Government passes superannuation reforms

38 Qantas trials earning status credits on cards

44 Bankwest and Westpac jump on board Android Pay

MORTGAGES

PERSONAL LOANS

34 NAB launches instant online home loan approval tool

40 Investors move $45m from banks to P2P loans


TOP 10 DECEMBER ST BASED ON RFi GROUP'S LINKEDIN PAGE (DAILY STATS FROM 1 DEC 2016 - 31 DEC 2016)

79% of UK savings account holders use online banking to interact with their primary savings account provider

90% of auto insurance holders in Canada have been with their current provider for over 12 months

Visa dominates the credit card market in the US, with 54% of top of wallet credit cards Visa branded.

27% 16% of Mexican retail banking customers hold a home loan

of UAE consumers use digital banking (internet or mobile banking) at least once a week


TATISTICS

#RFiGroupDailyStats

12% of all retail banking customers in Vietnam hold home loans

In the UK, 13% of consumers looking to open a new savings account would consider an online only bank

25% of Taiwanese banking customers rated having a comfortable retirement as their top financial goal

68%

In Australia, cardholders who use mobile payments are on average 27 years old

banking customers in the Philippines have used their savings to fund their lifestyle


Happy new Year and welcome to the January 2017 Edition of the Australian Retail Banker! 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. To kick off 2017, RFi Group’s Alan Shields shares his thoughts on digital mortgage origination ahead of our 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 cross-selling insurance and opportunities for banks. The monthly RFi Analytics contribution authored by Chief Data Scientist, Charles Higby, addresses the red-hot topic of Artificial Intelligence, Machine learning & Predictive Analytics, we hope you enjoy it Our Women in Leadership interviewee features a fantastic, fun and candid interview with Renee Amor of Rabobank, while this issue’s Thought Leader Interview section provides a great economic overview

heading in to the new year from HSBC’s Chief Economist Paul Bloxham, as well as an insightful piece with ex-Wall Street heavyweight and current CEO of digital investment platform success story, Ellevest, founder, Sallie Krawcheck. Our product news covers a steadying in term deposit rates despite recent cuts, Suncorp opening a new ‘concept store’, NAB’s launch of an instant online conditional home loan approval tool, the Government’s recent crackdown on payday lenders, Citi landing 10-year deal to manage Coles credit cards and Bankwest and Westpac jumping on board to offer Android Pay. I hope you enjoy this first edition for 2017 and as always, thank you for your support of RFi Group. I look forward to catching up soon.

Chloé James Editor / Group Media & PR Director +61 (0) 451 790 929 cjames@rfigroup.com


RFi GROUP OPINION

WORDS ALAN SHIELDS, RFI CONSULTING

T

he Australian Mortgage Innovation Summit (AMIS) is coming up on the 23rd and 24th February. This is RFi Group’s largest mortgage-focused event and it therefore seems appropriate to focus this month’s article on the Australian mortgage market. The threat of further capital imposts and their impact on ROE is driving the innovation imperative. As a consequence, in the last 12 months it is fair to say that the frequency with which we have been asked about digital innovation is increasing and the requests are coming from organisations of every size and shape in the mortgage space. The mortgage market has seen some exciting new developments in recent times, with lenders edging closer to digital mortgage origination, many banks launching innovation hubs and the entrance of online brokers and marketplaces such as LoanDolphin, Uno and Dfinanz. Throw all this into the mix and 2017 is shaping up to be an exciting place to be (or as exciting as mortgages can get). So the $64,000 question is, ‘what do consumers think?’ Are they willing to try and buy online or are they deterred by uncertainty? When we ask existing mortgage holders how likely they would be to submit an end- to -end home loan application entirely online, we find that the one in three (33%) say they would be highly likely to do so. This is not a bad result, but of course this means that we have two thirds who would not be so likely to go for an online option. So what is it that holds back the remaining 66%? In part the problem is that consumers only know what they are used to and what

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HOW LIKELY WOULD YOU BE TO COMPLETE AND SUBMIT A MORTGAGE APPLICATION ENTIRELY VIA AN ONLINE CHANNEL? 100% 80%

33% Highly likely (8-10 out of 10)

60% 35% 40% 20%

Neutral (5-7 out of 10) Unlikely (0-4 out of 10)

32%

0% Total Source: RFi Group survey of n=2,000 mortgage holders

they have experienced in the past. If that has been face-to-face, then that’s what they are comfortable with. And if they have had a bad/ clunky online experience, then again, that’s what they know. So if we look at the 32% of people that say they are unlikely to apply online and we ask them whether there is anything that would encourage them to do it, the results are actually quite promising. Certainly there were those that said nothing would encourage them to apply online, but nearly half (46%) said that indeed there were things that could be done. Specifically, the ability to take an application that has been started online into another channel, the presence of a support person via


RFi GROUP OPINION

What is it that holds back the remaining 66%? In part the problem is that consumers only know what they are used to and what they have experienced in the past.

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RFi GROUP OPINION

WHAT WOULD ENCOURAGE YOU TO APPLY FOR A MORTGAGE ONLINE? Mortgage holders who said they were unlikley to apply online Able to start online, but complete it in a branch if I need to

25%

Able to start online, but complete it over the phone if I need to

11%

The ability to save, stop and start the application at any time

18%

Guaranteed fraud protection

21%

Improved security

17%

More information on the security measures

10%

A dedicated application telephone support hotline

9%

An online live chat function for guidance throughout

9%

The ability to complete the application online via a mobile device

1%

Other

4%

Nothing would encourage me to apply online

54%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Source: RFi Group

telephone or web chat directly linked to the application and improved comfort with security of information are among the basics that these consumers want. Some of which already exists and much of which is well within grasp.

an institution that they have been a customer of for some time. Pre-population of customer data in these instances is critical in getting consumers over the barrier that the process is just going to be too hard and time consuming.

So, what is the answer? In my opinion it’s threefold. Firstly, we need to get the various banking channels working together in a more seamless way. Consumers want to choose to use the channel that makes the most sense to them at each stage of the application. Further, they want to move between channels as difficulties or new conveniences arrive.

Thirdly, we need to wean consumers off the perception that ‘in person’ means face to face. The complimentary service proposition that can be achieved through a shift to a service like click-to-chat is clear. And let’s not forget, the efficiencies that can be realised by reduced branch and call centre burden is also significant.

Secondly, in too many instances a consumer’s experience of a mortgage application involves being handed a blank application form and asked to fill in the details. This is often from

To discuss further, please contact:

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Alan Shields +61 2 9126 2606 / ashields@rfigroup.com


Australian Retail Banking Summit & Australian Retail Banking Awards, 2017 Join the RFi Group & AB+F for the Retail Banking event of the year, where all aspects of the Retail Banking sector will be explored. The Australian Retail Banking Award submissions open 30th January 2017 – 10 March 2017, don’t miss your chance to promote the great initiatives your team are doing in this space.

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RFi GROUP INSIGHT

O WORDS AMIT KHAN, RFi RESEARCH

For banks, insurance cross-sell represents a lucrative but untapped opportunity.

ne of the defining features of the insurance industry in recent years has been the advent of challenger and supermarket brands, which has seen intense competition (both price and product/ feature driven competition). New entrants such as Youi, Coles and Woolworths have firmly established themselves in the market, alongside the larger incumbent brands. For banks, insurance cross-sell represents a lucrative but untapped opportunity. This article explores how banks can potentially succeed, particularly within the home and/or contents insurance space; an area where banks can utilise process advantages to gain share. Reviewing the current competitive environment in terms of brand awareness and share of home and/or contents policies, the large incumbent brands such as AAMI, Allianz, APIA and NRMA lead the market. However the challenger brands such as Coles, Youi and Woolworths have firmly established themselves in the minds of consumers, via a mix of aggressive pricing, promotions and advertising (appearing amongst the top 15 brands in terms of awareness). The major banks do appear in this list, albeit lower down, with 28% aware of ANZ, 26% of CBA and 20% of Westpac. In terms of cross-sell performance, the banks have much room for improvement. RFi Group data indicates

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RFi GROUP INSIGHT

WHICH OF THE FOLLOWING ARE YOU AWARE OF OFFERING HOME AND/OR CONTENTS INSURANCE? Top 15 insurers - Trended April 2014

April 2015

April 2016

70% 60%

57%

56%

50%

46%

40%

38% 33%

32%

30%

28%

28%

26%

25%

25%

25%

23%

23% 20%

20% 10% 0% AAMI

Allianz

APIA

NRMA

GIO

Coles

QBE

ANZ

CBA

Youi

Suncorp

RACQ

Budget Direct

Woolworths

Westpac

Source: RFi Group

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RFi GROUP INSIGHT

THINKING BACK TO WHEN YOU OBTAINED YOUR HOME AND/OR CONTENTS INSURANCE POLICY, WHICH OF THE FOLLOWING ATTRIBUTES MOTIVATED YOU? By insurer segments Bank & Financial services

Incumbent Insurer Supermarket Insurers

Mutual organisations

Challenger Insurers Other Insurers

Total

100% 80%

74%

71%

66%

60%

61%

58%

54%

53% 46%

41%

40%

22%

20% 0% Product

Price

Promotion

Place

Process

Source: RFi Group

that out of the 47% of banking customers that have home /or contents insurance, only 13% hold the product with their main bank. Similarly, out of the 57% that hold car Insurance, only 11% hold the product with their main bank. In comparison, the cross-sell rates for core banking products are much higher – 95% hold a transaction account with their main bank, 75% for mortgage and 70% for credit cards. The logical follow on is how can banks improve insurance cross-sell? The key may lie in understanding where the banks have potential advantages that set them apart. The above chart illustrates the key drivers of choice in the home and/or contents market. The market as a whole is heavily driven by product (the level of cover offered) and the price of the policy (includes incentives and discounts). Where the banks stand out is in terms of process factors (purchasing process and policy bundling), with 61% citing it as a reason for choosing a policy with a bank (compared to 44% of the market). In fact process factors were the second most cited reasons for customers choosing to take a policy with a bank; price was far less likely to be cited.

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Deep diving into the specific factors within the process category for banks, two key areas are more likely to be cited – the overall purchasing process was easy/fast and it was offered as a part of a package. This highlights the importance of cross-selling via packaging during the mortgage purchase process and making the process of purchasing easier for customers. Aside from offering an attractive packaged home and/or contents product with a mortgage, banks should focus on making the insurance application process easy (including auto-filling application details). Furthermore, getting a better understanding of when to sell insurance to mortgage customers (pre, during or post loan settlement) is essential to improving cross-sell. If you have any questions, please don’t hesitate to contact the RFi Research team directly: RFi Research +61 2 9126 2613 akhan@rfigroup.com


10 MAR

EB 4F

JUN

Australian Lending Awards

Australian Mortgage Innovation Summit

Australian Business Banking Awards

SUBMISSIONS OPEN

(SUBMISSIONS CLOSED), SYDNEY

SYDNEY

SUBMISSIONS OPEN

02 M

AY 6M

AY

25 2

25 M

23 F

30 J

Australian Retail Banking Awards

- 23 JUN AY

Australian Retail Banking Awards

Australian Retail Banking Summit

Young Banking & Finance Professional Awards

SYDNEY

SYDNEY

SUBMISSIONS OPEN

SYDNEY

Global Digital Banking Conference

SUBMISSIONS OPEN

SINGAPORE

EP

CT

Global Digital Banking Conference

Australian Insurance Awards

Australian Insurance Summit

Young Banking & Finance Professional Awards

MELBOURNE

SYDNEY

SYDNEY

SYDNEY

12 O

12 O

CT

19 S

EP

Australian Insurance Awards

21 S

SYDNEY

EP

07 S

17 A

Australian Business Australian Business Banking Awards Banking Summit

04 AUG

19 J

UN

UG

17 A

UG

+ MORE TO COME

-9 PR

27 A

EB

23 2

AN

More to come, keep up to date with RFi Events & AB+F events via rfintelligence.com/events or contact Lucy Ladbrooke at lladbrooke@rfigroup.com / +61 2 9126 2627 ARB - RFi MEDIA 15


RFi GROUP WOMEN IN LEADERSHIP

General Manager - Marketing & Communications, Rabobank Australia and New Zealand Group WORDS CHLOÉ JAMES

Down in Sydney’s Darling Park, a long way from its homeland of Holland, sits the Australian HQ of Rabobank and RaboDirect for Australia and New Zealand. With close to 1,200 staff covering Australia and NZ and a 93-strong branch network across the region’s rural areas, I am here to meet with Renée Amor, General Manager - Marketing & Communications for the group. There are times in life and in business when you meet someone for the first time, and just click. Renée is engaging, warm and bright, with a sharp focused vision and intuition about her work, her career and inspiring advice to others moving through the ranks. We chatted away for the best part of an hour and I left with the sense that I couldn’t wait until we met again. She is fiercely proud of the bank and its global brand, when talking of the Dutch culture which has carried across the seas, Down Under. “The culture here has a lot of that Dutch influence, it’s very collaborative and it’s completely different to what I’ve experienced before” (she has spent time at both St George - through the complex Westpac merger no less - and CommBank, her role before Rabo). “It’s just very… European.” The first time Renée visited Holland she tells me how she was blown away by how innovative the banks were, in every aspect. “It is a different way of

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working, they really lead the tech front but to me the real difference is, is that it’s more genuine. The bank was built by farmers for farmers and it still is that. It’s an operating rhythm and a culture. In a business like this you have to get under the hood. You have to understand your business base and the only way to do that is to get out and meet them.” And of women in leadership, Renée expresses that Diversity and Inclusion is on every banks agenda and certainly a strategic pillar at Rabo and with that, we begin. How did you get where you are today and what, or who, has been your greatest influence in business? As far as the ‘what’ – “I think coming from a broad background of industries outside of banking, has really influenced my approach. By default I’ve also been lucky enough to work in very flat structures and more often than not, with a direct line to the CEO. It’s meant I’ve needed to think laterally and now when I look at a business problem – which is what marketing is, solving business problems – I think outside of marketing.” And the ‘who’ – “I’ve worked with so many inspirational leaders and I’ve always placed that as a really high priority when choosing roles. I look at the culture and leadership

and think ‘can I learn from this person, can get something out of this, is it going to stretch me and am I going to be in an environment where I think I can thrive?’ For me, the people piece is also really important. I learnt really early on that business is just a bunch of people working in the same place. The importance lies in all those people believing in the same vision.” Renée started her career, most interestingly, in Rugby League and explains that it was all about passion. “Passion - that’s what sport marketing is. If you don’t have that in the business you’re working for, then you’re not going to be able to enjoy yourself and that’s what work’s really about.” She explains that the key traits she admires in the greatest leaders, is a sense of not knowing everything, being able to admit it and being open to listening to others. “It’s about a ‘Diversity of Thought’ and that’s very much from the top down. I’ve learnt through the leaders I admire that diversity is absolutely vital to business success. From an individual, right through to leading a team, you need to be open to other perspectives. The strongest leaders I’ve had are sometimes the most unassuming people.” She explains the “are super intelligent of course, and always have the best and most intent listening qualities. The very best leaders in my opinion, take the ‘Diversity of Thought’, digest it and


RFi GROUP WOMEN IN LEADERSHIP

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RFi GROUP WOMEN IN LEADERSHIP

then make a decision based on all the information they have. It is having the courage to do that. Good leaders take responsibility for creating environments where others can express their perspectives.” What is the driving force behind your career goals/aspirations?

got improved engagement and improved efficiency. I think a lot of its success was in its set up and planning. It was done the right way. For me personally it was a huge achievement as it’s different to what I usually do. I’m a marketer and this was a real strategy piece that let me put my belief into diversity of thought into practice.”

I wondered what gets this energetic woman out of bed in the morning and she answers in an instant.

What do you do to keep evolving your career, to ensure a fulfilling and successful longevity?

“It’s people. It’s helping people deliver what they want to deliver, getting the best out of them, and giving them a sense of stretch and satisfaction. If I’m doing that, I’m doing my job.

“If I think about it professionally, wherever I am I’ve always had truly good insight into customer need, brand health and market research – something I take really seriously. It’s not just ticking a box saying we are doing a great job, its’ what are we learning along the way. I feel I am evolving and fulfilled by the market constantly changing, customers constantly changing and our tools constantly changing. With all of this change we have to change so it’s part of the operating rhythm, to continually update the way we work and to remain relevant.”

I’ve never actually had a career plan, I just really want to do a good job and watch everybody else do a good job at theirs.” Have you ever made a business decision you’ve regretted and can you share it? And what would you say is your greatest professional achievement to date? “Earlier in my career I used to go out of my way to retain employees. I’ve had to learn that if someone is ready to go, they’re ready to go and you have to let them, or even help them sometimes! When I was working for Rugby League and there was nowhere else career-wise to really go, I told my manager that despite that, I didn’t want to leave. It was such a tight family and I loved it. He turned around and said ‘no, you need to get out there, for your own development’. Looking back, I was really lucky to have him and be given that advice.” And to professional achievement – “I’d be lying if I claimed any of them” she humbly proclaims “because it’s always been a team effort. Recently I’m really proud of what we’ve done at Rabobank and RaboDirect pulling together the marketing and communications function, across the region and across the brand. The outcome has been measured and we’ve

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She enthusiastically describes a new initiative at Rabobank which sounds like a lot of fun, not to mention a great piece of business advice. Once a month the general managers from each of the different pillars get together - she cites Research, Internal Communications, Marketing, Digital, the Brand teams and Media Relations across the region, and say ‘ok what’s the problem we’re solving this month?’ “It gets people together and it really does move the business forward. It personally keeps me energised because it means I’m learning from the people I work with, I’m listening and ultimately we are able to make a difference.” 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? “I think this has changed somewhat having my daughter.” She smiles warmly. “My husband is able to work from home and is therefore, a stay-at-home dad. It means I don’t have the stress that a

lot that of returning mums have and I have such a newfound respect for mums who do work, because it is really hard. I’m also really lucky to be in the most flexible working environment I’ve ever been in. Work/ life balance for me isn’t just about coming in at 9 and knocking off at 5, for me it’s the flexibility to be able to work when I need to. Being part of a global company, if I need to talk to New York on a Saturday morning, I want the flexibility to be able to log on to the work drives, pick up the phone, then shut down for the day. I need to be accessible. For me that’s the flexibility that we’re striving to improve at Rabobank. I’ve always thought that it’s not about where you work, it’s about what you do and about getting the job done - wherever you may be!” Outside of business Renée proudly volunteers for bush regeneration. “I think it’s really important to get back in to nature and out of the concrete jungle. I also live at the beach, and it’s important to me to walk past it every day to get to work. And my husband and my daughter. I love them and the time we share is really important to me.” Do you mentor others? And, what have you learnt in the process? “I do. In this organisation, in other banks and also, outside of banking. They are people I’ve picked up along the way and people who have approached me randomly. I’ve learnt that its two way and I’m always going to learn too.” And here I find she has learnt a very interesting observation – “It might not be conscious but I do find my women mentees are often looking for someone to help identify their strengths and build on those whereas a male mentee usually wants someone who can connect them, assist with their career trajectory, or help with a technical skill. It shows me men and women want different things from their careers.” “This is also one of our focus areas in Rabobank’s Diversity & Inclusion, and across our Talent agenda, to support further growth from Junior into Senior roles for women. Mentoring is a key way to help.”


RFi GROUP WOMEN IN LEADERSHIP

What do you think is the most significant barrier when it comes to women in leadership roles? On the first point, she echo’s so many of my Women in Leadership interviewees. “Confidence.” And secondly? “I also think that organisational structures still aren’t really set to support women. They are really old school, set up in a time where men came to the office and women stayed at home. I don’t really feel they have changed.” And then there is the review process. “I always think around review time, in most reviews, not always, but most, women won’t get in there and selfpromote. They’ll look at the faults. I find that generally - and there are of course exceptions to every rule - males will come in to a review and say ‘I’ve done everything perfectly, here’s all the good stuff and I also need a 10-% pay rise’. It’s just a diff approach. Until women change the way we approach those kind of things, they’re always going to set us bac k.” She continues on what I find a very insightful theme – “I also think there’s a taught behaviour of fear especially with women when dealing with hierarchy. It comes down to confidence and knowing if you’re there, it’s because you’re valued. But if you don’t step up and put forward your valued opinion, then you’re really not doing your job well. I’ve been reading a lot about how you raise girls and I think a lot of it isn’t in fact nature; it’s the way we’re taught. There are case studies that tell us if a little girl falls over everyone rushes to coddle her whereas if a little boy does it’s ‘you’ll be right mate’ dust yourself off and move on. It’s the way you’re brought up to deal with negative situations. I really think it’s’ true. I try to have an open mind about it and when my little girl does fall over or have a fight, I want to try to let her sort it out. To me it’s not

just corporate; it’s much bigger than that.” What advice would you give to young women who want to succeed in the workplace and what do you see as the biggest challenge for future generations of business women? “I think young women need to jump in before they are absolutely ready. Young men, generally speaking, will think “its ok, I can learn that on the job”, women tend to think “I need to be 100% and a little bit more before I can go for it”, I know because I’ve always felt like this! But it’s having that confidence to get in to the job and just go for it, when it’s been handed to you especially, you just have to jump. I do think males have those doubts as well, but they just seem to have that little bit of extra courage. We need more male champions to get behind and support women in business as well.” Through her mentoring Renée explains her male mentees will say “I need to get from here to here on a job description can you skill me up”, whereas the women she advises will often say they don’t know how to approach difficult situations and challenges. “It’s a different type of mentoring. The women I mentor are quite often looking for tips and guidance on how to navigate through politics and circumstances that are male dominated. I think working in rugby league for 8 years put me in good stead! Also, being in a male dominated industry from such a young age, I never thought “I shouldn’t be here”.” Ignorance is bliss, we laugh together! “I didn’t have that fear of hierarchy. I think that’s what people forget. Through the hierarchy, they’re still just people, people with great experience yes, but I’ve got great experience too, to bring to the table. It’s having the confidence to believe that’s why I’m here.” 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?

“I think some women in banking think you need to be steely and hardnosed to get ahead. I really don’t think that’s the case. I do have some specific advice which I do pass on. It was something that was given to me. Just one of the reasons we need more women in Leadership roles is because they often bring different perspectives or management approaches to men.” I’ll happily admit I have since done this exercise! “You write a list of the top 20 things that make you happy, in work and in life. It might be working with people, salary expectations, being across the numbers, planning, brainstorming, leading, being part of a team - all the things that are important to you. Then you think about your current role and think, ‘does it tick the boxes’. It’s a great way to navigate through your career. It’s not always up, it can be sideways, in a different direction, but it makes you realise a) what you’re good at and b) what would be the ideal role for you.” She closes with some inspirational words of wisdom – “It’s a cliché, but you really need to back yourself. I don’t think it’s what females naturally do. Sometimes you just need to jump in feet first and apologise later! And I don’t want that to be misconstrued, we are in a risk adverse industry! I mean in terms in of taking chances for your career. If you’ve got the right gut instinct, you’ve done the due diligence and if it’s going to make you happy, then you’ve got to jump in feet first, give it your all and see if it works. It’s never going to tear you apart if you’ve made the wrong choice, but at least you’ve tried and you’ve most certainly learned.” A great ending to a great interview. Renée was an absolute pleasure to speak with, and to learn from. To read the full WIL series and all past Australian Retail Banker editions, feel free to visit the archive centre on our website.

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THOUGHT LEADER INTERVIEW

Chief Economist, HSBC AU, NZ & Global Commodities

WORDS CHLOÉ JAMES As we all set out on what’s bound to be another busy year, RFi Group’s Chloé James sat down with HSBC’s Chief Economist Paul Bloxham to look at ‘the year that was’ and perhaps more importantly, Paul’s views for the coming 12 months. It is no secret or surprise that 2016 was an economy still very much influenced by a tricky rebalancing act with the end of a mining boom and grappling with subsequent low-wages. I asked Paul what economic factors could offset these challenges. Paul cites a continued fall in interest rates and rise in asset and housing prices in general - certainly in major cities, which has helped the economy feel a stabilisation, if not a slight boost.

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THOUGHT LEADER INTERVIEW

He rightly notes, a lot of this does depend on in which state, you lay your hat: “Individual views on the state of the economy really does depend on where you are in the country. 2016 has seen large regional divergences; those in Sydney and Melbourne have been doing quite well, but in Perth, Brisbane and Adelaide, it’s a bit of a different story. NSW is quite obviously booming, Victoria isn’t far behind, but if you head across to WA, they’re still in the depths of a deep downturn.”

Essentially, we believe that the drag that the mining sector has been on Australia’s growth for the last few years is going to come to an end in 2017 – which really is one of our key themes, coming to the end of that significant re-balancing. Going into 2017, Paul predicts that the unstable mining industry is going to steady, making way for some positive changes: “We’ve already seen a lift in commodity prices, mining investment has got a little bit further to fall, but we think it will start to stabilise around the middle of 2017 which should provide a bit of support for WA and Queensland. Essentially, we believe that the drag that the mining sector has been on Australia’s growth for the last few years is going to come to an end in 2017 – which really is one of our key themes, coming to the end of that significant re-balancing.” Another major shift and development, and where Paul predicts Australia’s next major growth engine will flourish, is in services exports. With tourism, international education and business services already providing early stage growth, Paul warns if it is in fact the services sector that is really going to drive Australia’s growth. It is therefore imperative that we make our major cities more efficient. “One of the things we need to continue to do is to make our cities smarter. To build better infrastructure and reduce congestion, making it more affordable and easier to live further away from the middle of our cities, which should help to deal with some of the affordability issues with regards to housing. A major issue that continues to present challenges with regards to affordability and accessibility, is that the demand for living in the middle of our cities remains very high relative to supply, so I do think the remedy here is improving accessibility and supply. Part of that is allowing increased urban infill in terms

of more higher density dwellings to be built, but it’s also about improving our networks and connect-ability and making it easier, more reasonable and more affordable for people to live further out.” With the services sector likely to be the driver of Australia’s growth, Paul and I agree the provision of those services is certainly a competitive space to be in. If you want to be an attractive destination for tourists, international students, provision of business services and - as a by-product, have stronger, more stable economy, the focus really does need to be on making your city more appealing and attractive. Finally Paul gave his views on the major economic trends and general thoughts on what may shape our coming year. The need for continued fiscal reform will be a key challenge and he is also keeping a keen eye on international political matters. “Australian policy makers need to continue to strive for fiscal reform, and if they don’t there’s certainly a risk we may lose our AAA rating, which would be disappointing. A strong reform agenda will allow us better access to international markets, which is crucial. Another key goal must be continuing down our path of ongoing infrastructure development, an imperative for improving the inefficiency and productivity of our cities which will continue to support growth in services, particularly services exports.”

Australian policy makers need to continue to strive for fiscal reform, and if they don’t there’s certainly a risk we may lose our AAA rating...A strong reform agenda will allow us better access to international markets, which is crucial. As far as major shocks, it’s no surprise they are likely - as they did in 2016 - to come from abroad. “The political developments abroad will very much be on Australia’s radar. Regarding the president elect Trump administration, it is still very uncertain as to what that’s going to mean in terms of the global economy and it is something people will be watching very carefully. There’s a set of political developments in Europe – we have a French election, a Dutch election and a German election all set for 2017, which all have the capacity to send a shock wave through global markets, which of course would have a bearing on Australia, depending on how things play out.” Follow @RFiMediaGRB on Twitter to keep up to date with the latest interviews and news at RFi Group.

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THOUGHT LEADER INTERVIEW

CEO, Ellevest

WORDS CHLOÉ JAMES At Money 20/20 2016 in Las Vegas, Group Media and PR Director, and Author of RFi Group’s Women in Leadership series, Chloe James, heard from none other than Sallie Krawcheck ex-Wall Street heavyweight and current CEO of Ellevest, a digital investment platform (or in Chloe’s words - financial empowerment weapon!), for women. “When we started this journey a lot of people said, ‘Well, why just for women?’ And the truth is, women don’t invest to nearly the same extent that men do, it hurts women to the tune of tens of thousands, hundreds, and thousands to millions of dollars over the course of their lives. If you take a step back it hurts whole economies because the retirement savings crisis, is really a women’s retirement savings crisis, not only do we live so much longer than men do, we don’t even come close to what they have. At Ellevest we started with the issue of ‘what’s out there and what isn’t working?’ and made it marketing appropriate for women, it was really about ‘what can we do to fundamentally address what women are looking for?.’”

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An Ex-Wall Street CEO, Sallie was literally at the top of the most male-dominated industry of all time. She revealed her experience in learning of this deep divide… “Many would claim it’s not, but if an industry is 86% male - as the financial adviser industry is - what you find is that even when lead advisers think they’re talking to both genders, they’re not. When we would bring in couples in and have them speak to an adviser, the adviser would often say, ‘You know, I think I spent about 55% of my time talking to the man, and 45% of my time to the woman’, we’d play the tape back and they’d actually spent 90% of the time talking to the man and 10% of the time talking to the woman.” Sallie saw that women are different, therefore they need something that speaks to them differently. “I will be one of the first to say - generally speaking - women need more financial education than their male counterparts. Women tend to be more risk-averse,


THOUGHT LEADER INTERVIEW

hence they often aren’t as good investors as men. The industry has these ‘rules’ and essentially, they tell women ‘conform to us.’ If women were investing the same as men, I wouldn’t be on this path, I would say forget it, just go ahead and keep the industry as it is, but it isn’t, so something needs to change. If you’re a woman making $85,000 a year and you take a twoyear break, how much does it cost you? Most people say it’s $170,000. The answer is $1.7 million. I think there’s room for us to have those conversations.” On to risk aversion, Sallie has seen it time and time again, that the women she acknowledges aren’t afraid to say ‘that doesn’t make any sense to me,’ ‘how much money could I lose?’ ‘What are my chances of reaching my goal?’ “Women who try to understand it are more likely to invest. They want to be informed. To have a ‘relationship’ with their investment. There are assumptions out there which in some ways will blame women and make them work harder, and so we went into Ellevest with ‘what can we do to change that?’” Design is critical part of Ellevest’s online experience. “What happens today is a woman connects, ‘My name is Suzy, I’m a quite successful 35-year-old woman, I make this much money, this is how much I have to invest, and this is what I want to achieve.’ We call it a shopping page. There are simple tick boxes if you like; ‘I want to retire well, I want to own my own home, I want to start a business’ and we employ very powerful technology algorithms

for that individual, calculating what she needs to do and what she can afford to do, from there. The site and the language just really works.” Sallie adds that Ellevest users wanted something that was smart and beautiful, a value they employed from the very beginning. And the feedback has been great - they are not getting simple oneword responses, but paragraphs stating ‘Thank you for doing this. Finally, someone recognises I’m not comfortable with what’s out there.’ Sallie has never seen anything like this in her life. The use of algorithms, roboadvisers and a far more technical way of advising, is certainly at Sallie’s forefront. “I think it’s the way of the future. Yes, people will still be involved and it’s not yes or no, all or nothing, but to my mind the traditional industry needs to fit in with its digital side. With sophisticated digital offerings, you can have so many more customers. One of the other things I saw when I worked for these huge banks is if you’re talking to everybody you’re not talking to anybody, in particular how much money do you have, how many customers do you actually have? There were always so many on a waitlist and we’re getting to those people now.” The other big issue clearly so close to Sallie’s heart is the gender pay gap. “When it comes to women and men there are some gaps. But six months ago, if I brought up the gender investing gap you probably

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RFi GROUP INTERVIEW

would’ve said what are you talking about? I really think the first thing to do is, to make all of us, and women in particular, aware that there is this gap and that closing this gap is good for everyone. I mean, imagine the $5 trillion we’d get to unleash into the markets, the powerful force it can be in the economy if women had those funds! That to me is really number one at the moment.” I remember when I was on Wall Street and I couldn’t quit because I needed the job; I needed the money. I talk about ‘investing’ as the best career advice that women don’t get. If you invest and if you earn a return on your time, which investing has historically done, you can get those hundreds of thousands of dollars which gives you the power to leave the bad job, the bad relationship, to start the business. If we were to go to macro, the strides that women have made in feminism are not complete and not equal with men until we’re financially independent and investing is a big chunk of it.

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Sallie concluded the interview with her view of her now entrepreneur-status, compared with the Wall Street Days of old. Everybody who’s on Wall Street finds it hard but when you’re running huge businesses with billions of dollars of earnings, the government tends to bail you out when they get into trouble, there’s a certain safety net that’s there that in your own business you don’t have! When you’re a start-up, you’ve got about three mistakes in you, maybe two, and then you run out of money. That being said, the other side of it, is it’s enormously exhilarating. Today I think I can have a bigger impact on the world around me than many of the big companies I know, and the ability to have that impact is really meaningful and important and I love that. Follow @RFiMediaGRB on Twitter to keep up to date with the latest interviews and news at RFi Group.


RFi PERFORMANCE ANALYTICS OPINION

WORDS CHARLES HIGBY, RFi PERFORMANCE ANALYTICS

W

ith Christmas having recently passed by I wanted to “geek out” and share with you our experience with some of my new favourite analytical toys.

We recently conducted a project that is best described as “buzzword compliant”. It was a predictive analytics project that employed Artificial Intelligence, Machine Learning, Microsoft Power BI, The Cloud, RStudio and even a little bit of Excel. Part of the brief was to predict a business metric for the year ahead using macroeconomic data. This is known as a multivariant problem but the challenge was the significant number of variables (variants). The answer lay somewhere in over two thousand macroeconomic indicators (GDP, underemployment etc.), in five states, with a lag of between zero and fifty months for each by six different algorithms. In summary, the answer required over three million experiments to find it.

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RFi PERFORMANCE ANALYTICS OPINION

To find the answer we employed some of my new favourite analytical toys. Firstly, we obtained over ten thousand macroeconomic data series from public sources. Microsoft PowerBI and the new versions of Excel have made this significantly easier to set up as a repeatable and maintainable exercise by linking to the online data sources. For those of you not familiar with PowerBI, this is a fantastic tool from Microsoft that is free. Yes free. The sublime combination of PowerBI, a database and R studio are incredibly powerful and worth exploring. We then needed to wrangle the data into a consistent format as some of the data was monthly, some was quarterly etc. Again, PowerBI made this job significantly easier than trying to wrangle and reformat it in either a database or Excel. For every one of the macroeconomic measures we needed to identify the optimal lag to use which could have been anywhere from no months to fifty months. For this we used RStudio which is a free open source tool that is amazingly powerful for performing scripted statistical analysis. Next, we used a branch of Artificial Intelligence (AI) called Machine Learning (ML). Whilst the two terms are often used interchangeable they are slightly different. AI is the concept of machines doing things that you or I would consider clever. ML is giving a machine access to data and letting them learn from the data themselves. In essence a specific application of AI. In order to use ML you need to divide your data into two sets. The first set is data that you want the machine to learn from. The second set is the data the machine will use to test how well it is going with its learning. There are a couple of great tools out there right now in this space but we employed Microsoft Azure Machine Learning Studio. We used this tool to split the data and run through the various experiments and to test each of them against the six different algorithms. The results were fed back into Microsoft PowerBI which acted as a dashboard to visualise the results.

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We were able to then further improve our results using exactly the same tools to take seasonality into account. The results were incredibly predictive – almost too good in fact. I was conscious that we may have fallen into the trap of “over fitting” the model. This can happen if you use a number of variables. Luckily there is a very simple test. Any model that has been over fitted rarely survives as new data is added. In this case, we were missing the last year of data we needed to predict. Like the proverbial magician, stating “there is nothing up my sleeves”, we were able to go back to the client, show them the last year of results and find out just how close our predictions were for their business metric. The answer was “very close” or in statistical terms, we achieved an R squared of > 0.8. As most of the client’s analytics team did not have access to PowerBI we exported the results to Excel so they were in an easily digestible format – again a task made easy via PowerBI.

Machine learning and AI can find correlations but we still need a good analyst or data scientist to use their judgement as to whether they make sense. In preparing to walk the business through the results I was reminded there is a big difference between correlation, causation and things that are just plain spurious. Just because there is a strong correlation between the number of people who tripped over their own two feet and died and the number of civil engineering doctorates awarded in the US it doesn’t mean the two are actually and usefully linked. Machine learning and AI can find correlations but we still need a good analyst or data scientist to use their judgement as to whether they make sense.


RFi PERFORMANCE ANALYTICS OPINION

NUMBER OF PEOPLE WHO TRIPPED OVER THEIR OWN FEET AND DIED CORRELATES WITH

CIVIL ENGINEERING DOCTORATES AWARDED (US) Civil engineering doctorates awarded (US)

800

800

725

700

650

600

575

500

500

Degrees awarded

Deaths (US)

Number of people who tripped over their own feet and died

400 1999

2000

2001

2002

2003

2004

Correlaion: 91%

2005

2006

2007

2008

2009

Sources: CDC & National Science Foundation tylervigen.com

Number of people who tripped over their own feet and died Deaths (US) (CDC) Civil engineering doctorates awarded (US) Degrees awarded (National Science Foundation)

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

611

565

564

646

597

584

698

687

691

729

788

584

480

501

540

552

547

622

655

701

712

708

Correlation: 0.913963 Created by Tyler Vigen, http://www.tylervigen.com/spurious-correlations, adapted by RFi Group, subject to the creative commons license 4.0 https://creativecommons.org/licenses/by/4.0/

My key take outs from this project are: • Do not underestimate the amount of effort or work that is required to wrangle data into a consistent format for consumption in a Machine Learning environment • RStudio is one of the most powerful and free statistical analysis tools available. Having people in your team who know how to use it and use it well can provide incredible insights. • Microsoft is a serious player in the analytics space and its free Power BI tool is evolving rapidly, links to just about any data source and integrates with RStudio. It is worth adding this into your analytical arsenal. • Machine Learning in a semi-automated / scripted fashion can be used to work through truly herculean problems. • I believe we can employ this same approach through 2017

to not only the field of predictive analytics but to help our clients better understand the factors that are the greatest influencers of their customer’s behaviour. • As good as AI and ML are, you still need someone to obtain and wrangle the data, construct the experiments, validate, interpret and present results. As such the jobs for data scientists and analysts the world over are still safe but will certainly be evolving to take advantage of these tools to a greater extent in coming years. 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 / chigby@rfigroup.com

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TRANSACTIONS

Transactions Digital experience most important to banking customers

D

igital experience is more important to consumers when interacting with their bank than it is with other service providers such as retailers and utilities, according the latest Visa-RFi Group Payments report. However, the good news for the financial services industry is that consumers generally rated banks over online retailers and telcos when it comes to digital experience. Of those surveyed, 33% rated banks as delivering the best digital experience, compared to 21% who voted for online retailers and 12% who voted for telcos. According to Rob Walls, Head of Product, Visa Australia, New Zealand

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It’s clear that Australia’s banks are leading the way both locally and globally when it comes to offering outstanding digital experiences to customers. and South Pacific, this shows that the banks’ investments in digital is starting to bear fruit. “As a global payments technology company, Visa sees innovation in digital banking around the world. It’s clear that Australia’s banks are leading the way both locally and globally when it comes to offering outstanding digital experiences to customers. The continual investment in the design and features of online banking apps and services is paying off,” he said.


TRANSACTIONS

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Image source: The Design 100 (2014). Suncorp Bank Retail Transformation- Highpoint Branch [Image]. Available at: https://design100.com/mel14/entry_details.asp?ID=13604&Category_ID=6009 [Accessed 12 Jan. 2017]


TRANSACTIONS

Suncorp opens ‘concept store’ Suncorp has overhauled its branch design, opening its first concept store in Sydney in December. Instead of teller desks or fixed machines, the concept store has retail ‘zones’ for specific customer needs. For example, the theme in December is ‘Our Home is Your Home’, which aims to guide customers on the home buying journey. “We’re working collaboratively with leading businesses to deliver a unique platform which provides customers with a step-by-step guide to buying a house. From inspecting properties, legal solutions and landscaping recommendations to discounted white goods and electronic installations within the home. We will continue to build on this and change the themes based on our customers’ needs each month,” said Lynne Sutherland, Suncorp Executive General Manager of Stores. Inspired by global retailers such as Apple, the concept store also has an interactive display, recharging stations, refreshments, break out spaces and in-store events. In addition, it will host free weekly lifestyle workshops and seminars that are designed to help customers feel more confident about their financial decisions.

RFi Group data suggests revamping branches may help banks differentiate themselves from competitors. Despite the growing prevalence of mobile and digital channels, a significant proportion of consumers still visit a branch – a prime opportunity for banks to engage with their customers. According to RFi Group’s survey of the general population in July 2016, 89% of consumers visit their main bank’s branches. Nearly two thirds visit at least once every six months and more than 1 in 4 visit at least once per month. HOW FREQUENTLY HAVE YOU VISTED A BRANCH IN THE LAST 12 MONTHS? 40% 30%

29% 24% 21%

20%

15% 11%

10% 0% At least once per month

Once or twice a quarter

Once or twice every 6 months

Once or twice a year

Never

Source: RFi Group

ANZ launches BladePay ANZ has launched a new mobile payments solution for business owners, ANZ BladePay. BladePay is a hand-held Android-based payment device with a touch screen and GPS functionality. The device has an attached card reader, and can be integrated with third party apps. “ANZ BladePay is a fully integrated and innovative solution that will simplify business operations. What really sets ANZ BladePay apart is the software our vendor partners are developing, which is tailored to our customers’ needs,” said ANZ Group Executive Fred Ohlsson.

Currently, the vendor partners are NCR, RedCat, H&L, SureFire, Abacus and Shout for Good, who are working on apps to include features such as ‘order and pay at table’, split bills and tipping options, ability to email and SMS receipt and staff-shift clock-on features. According to an ANZ press release, the bank is actively working with a number of other vendor partners. BladePay will be available to the hospitality industry in March 2017, followed by the retail and B2B industries.

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SAVINGS

Savings Term deposit rates expected to remain steady despite cuts

T

he competitive term deposits that were seen after the Reserve Bank of Australia (RBA) cut the cash rate in August 2016, when providers moved against the RBA and raised interest rates, appear to be short-lived. According to comparison site Mozo, term deposit providers decreased rates 137 times in PROPORTION OF TERM DEPOSIT HOLDERS THAT HAVE MOVED MONEY FROM SAVINGS TO PROPERTY/ SHARES IN THE LAST 12 MONTHS 40% 30%

26% 19%

20% 10% 0%

Property holdings

Shares

Source: RFi Group

… 1 in 4 term deposit holders have moved money to shares in the last 12 months, while nearly 1 in 4 have moved money to property holdings. November 2016, and increased them only 31 times. However, Mozo’s Product Data Manager, Peter Marshall, believes term deposit rates are unlikely to fall further and that providers will maintain their current offerings well into 2017. “With many lenders hiking fixed rate home loans in November, it may provide them with more space to maintain current term deposit rates in 2017. If the RBA sits on its hands for the next six months, I don’t think term deposit rates will fall much further,” he said. Low term deposit rates may encourage more term deposit holders to look towards other investments. According to RFi Group’s survey of 2,000 savers in July 2016, 1 in 4 term deposit holders have moved money to shares in the last 12 months, while nearly 1 in 4 have moved money to property holdings.

Household saving ratio falls in September 2016 quarter The latest ABS figures show the household saving ratio, which is the ratio of household net saving to household disposable income, fell between June and September 2016, from 6.7% in seasonally adjusted terms to 6.3%. According to Michael Blythe, Chief Economist at CBA, the decline has been largely driven by weak income growth, as well as low interest rates. “The downward revisions to the household

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saving rate is concerning. The gap between reasonable consumer spending growth and weak income growth has been filled by cutting the savings rate. This outcome may be harder to sustain going ahead given the lower savings buffer,” he said. These figures are in line with RFi Group data, which shows that the proportion of savers who have used money from their savings to fund their lifestyle increased over the year to July 2016, from 50% to 57%.


SAVINGS

Government passes superannuation reforms The Federal Government has introduced several reforms to the superannuation system that will come into effect from July 2017. The reforms include a $1.6 million cap on the amount of money that can be held in a tax-free pension, as well as a $100,000 cap on after-tax contributions. Currently, there is no limit on the amount of tax-free super and individuals can contribute up to $180,000 of their after-tax pay to super. Pre-tax contributions will be also be capped, at $25,000 per year. The current limit is $30,000 per year for individuals under 50 years old and $35,000 for those over 50. According to Josh Rundmann, Technical Services Manager at financial services company IOOF, the most significant change is the $1.6 milllion cap.

It needed to be fairer...more flexible... more sustainable. We took the difficult decision to go and pursue that. And we took it to an election. “This is a big change from how pensions worked in the past. It is a significant shift away from the current system. It will limit the amount you can accumulate, as well as put a limit on the amount you can get into a tax-free pension,” he said. However, Treasurer Scott Morrison claims these reforms are fair, necessary and sustainable. “It needed to be fairer, it needed to be more flexible. It needed to be more sustainable. We took the difficult decision to go and pursue that. And we took it to an election,” he said.

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MORTGAGES

Mortgages NAB launches instant online conditional home loan approval tool

N

AB customers can now apply online for conditional approval for a new home loan and receive an instant response via the bank’s new tool, NAB goAHEAD. According to NAB, it is the most comprehensive online conditional home loan approval in Australia. The form is pre-populated with the customer’s information and takes on average 15 minutes to complete. “Until now, Australians have only been able to receive a rough guide on what they can borrow via online forms. What we’re giving customers through NAB goAHEAD is true conditional approval - just like they would receive if they spoke directly with a NAB banker,” said Meg Bonighton, General Manager of Home Lending at NAB. “With NAB goAHEAD, customers can complete the application, receive conditional approval, and make an offer on a property the very same

While most consumers prefer to apply for a home loan at a branch, 1 in 4 of this proportion would apply online if they could continue their application at a branch. day with confidence that they’re backed by NAB,” she added. NAB goAHEAD has a live chat functionality so that customers can receive assistance if they need it during the application process. Customers who complete an online application will also be able to continue their conversation seamlessly in a branch or over the phone, according to Ms. Bonighton. RFi Group survey of 2,000 smartphone and tablet owners in September 2016 suggests these features will drive online home loan applications. While most consumers prefer to apply for a home loan at a branch, 1 in 4 of this proportion would apply online if they could continue their application at a branch while 17% would apply online if there was a live chat function.

WOULD ANY OF THE FOLLOWING ENCOURAGE YOU TO COMPLETE A HOME LOAN APPLICATION ONLINE? TOP 4 REASONS Smartphone/ tablet owners who would prefer to apply at a branch

Ability to start an online application, but continue it in-branch

27%

In-branch service that helps me if I get stuck

26%

Ability to save and pause/ continue the application

20%

Online live chat function

17%

Dedicated phone support hotline

17%

0%

5%

10%

15%

Source: RFi Group

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20%

25%

30%

35%

40%


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MORTGAGES

New Greater Bank loan enables FHBs to borrow up to 110% First home buyers (FHBs) can now borrow up to 110% of the property price with Greater Bank’s new family pledge loan. Borrowers can use the equity in a family member’s home as security on their mortgage, although they will need to show that they can meet the monthly repayments. “The advantage of the loan is that it reduces the required deposit, so borrowers avoid the need for Lenders Mortgage Insurance and are able to take advantage of discounted rates,” said Chris Baguley, lending manager at Greater Bank.

The advantage of the loan is that it reduces the required deposit, so borrowers avoid the need for Lenders Mortgage Insurance and are able to take advantage of discounted rates. Currently, FHBs need to pay for Lenders Mortgage Insurance if their deposit is less than 20% of the property price.

Affordability worsens despite historic low rates The proportion of median family income needed to meet average monthly loan repayments has increased slightly, from 29.4 % to 29.5% in the September 2016 quarter, according to the latest Adelaide Bank/ Real Estate Institute of Australia (REIA) Housing Affordability Report. “Unfortunately, historically low interest rates were unable to offset the increasing size of mortgages resulting in the rise in the proportion of the median family income required to meet average monthly loan repayments,” said Neville Sanders, REIA President. According to the report, affordability improved in Victoria, South Australia, the Northern Territory and Australian Capital Territory, but remained the lowest at in New South Wales.

Affordability improved in Victoria, South Australia, the Northern Territory and Australian Capital Territory, but remained the lowest at in New South Wales.

Meanwhile, affordability has improved for renters, with the proportion of the median family income required to meet average rental costs falling by 0.6 percentage points to 24.2% during the September 2016 quarter.

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CARDS

Cards Qantas trials earning status credits on credit cards

Q

antas has announced that it is trialling a new rewards offering. Between December 2016 and May 2018, selected members of its Frequent Flyer program will earn one credit card status credit for every 400 Qantas points they earn on their Qantas Frequent Flyer credit card. Currently, the only eligible cards are the Macquarie Black card with Qantas Rewards and the Westpac Altitude Black card with Qantas Points. According to a Qantas spokesperson, the trials aims to help Frequent Flyers to reach and maintain membership tiers. “The ability to earn Status Credits is highly prized by our members and we wanted to explore how we could potentially reward frequent buyers

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According to a Qantas spokesperson, the trials aims to help Frequent Flyers to reach and maintain membership tiers. as well as our Frequent Flyers with status,” said the spokesperson. However, members will still need to earn regular status credits by flying as they will not be able to upgrade or maintain tiers with only credit card status credits. The trial follows the recent partnership between Virgin Australia and Coles FlyBuys, which allows FlyBuys’ members to earn Velocity status credits as well as Velocity points on their FlyBuys cards when shopping at Coles, Liquorland and First Choice Liquor stores.


CARDS

Citi lands 10-year deal to manage Coles credit cards

New partners Amex and Dimmi rollout first offer

Coles’ parent company Wesfarmers, which also owns retail chains Target, Kmart, Bunnings and Officeworks, has struck a 10-year deal with Citi to distribute Coles credit cards. While Coles credit cards will still be distributed under its own branding, Citi will now be managing the portfolio which includes issuing the cards and funding its receivables. Coles credit cards were previously managed by GE Capital.

Amex cardholders who spent more than $50 at a restaurant booked via Dimmi in December 2016 received $20 credit on their card. This is the first offer from the new partnership between the card scheme and online restaurant booking site. The partnership was announced in September 2016 and enables Amex cardholders to identify and make reservations at Amex-accepting restaurants on Dimmi.

However, the change is unlikely to impact Coles’ credit card offerings. According to John Durkan, Managing Director at Coles, the supermarket chain will continue to offer simple and competitively priced products to consumers.

According to Sian Chadwick, Vice President Global Merchant Services Marketing at American Express Australia, this offer is an example of how the partnership benefits both restaurants on Dimmi and Amex cardholders.

Coles currently provides three credit cards in the market - a low rate card, a no annual fee card and a rewards card – which has a total receivables amount of around $800 million as at October 2016. At this stage, the only notable change is that existing Coles cardholders will not be able to transfer their balance to a Citi card, or vice versa, as the cards have the same issuer. RFi Group data shows that Coles and Citi currently have a 14% combined share of total credit cards.

“Today’s diner is digitally discerning. Almost half of all restaurants use digital booking systems to reserve a table and a further two thirds read online reviews before making a decision to book. We are proud to be able to support our Merchants with the digital tools to drive more bookings and promote themselves. This offer only serves to highlight the additional value we bring to our Merchants through our partnership with Dimmi,” he said.

MARKET SHARE OF TOTAL NUMBER OF CREDIT CARDS 20% 15% 10%

8% 6%

5%

We believe it is a win-win situation for both our Card Members and our Dining Merchants. “It’s a great offer for our Card Members too. We are delighted to be able to offer an enhanced dining experience for customers that is not only convenient to book but will earn them credit for dining out and paying with their American Express card. We believe it is a winwin situation for both our Card Members and our Dining Merchants,” he added.

0% Citi

Coles

Source: RFi Group

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PERSONAL LOANS

Personal Loans Investors move $45m from banks to P2P loans Retail investors have moved around $45 million from their bank accounts into peer-to-peer (P2P) loans, according to online P2P lending platform RateSetter. Since launching in 2014, RateSetter has funded $76 million in loans and claims more than half was originally in bank accounts, as investors are seeking assets that pay higher returns than deposits but are less volatile than shares. “About 60 per cent of the funds that have come onto our platform have come out of bank accounts,� said Daniel Foggo, Chief Executive at RateSetter, quoting findings from an internal survey of its investors. RateSetter currently has around 5,000 investors but estimates this number will double within the next six months. The online platform is currently funding around $2 million in loan per week, with its loan book growing by about 200% in 2016, according to Mr Foggo. Despite the growing number of investors moving funds into peer-to-peer loans, RFi Group data suggests that it will be awhile yet before consumers turn to peer-topeer loans. Consideration of peer-to-peer loans among current personal borrowers is forecasted to remain steady over the next six month, at 6%.

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PEER-TO-PEER LOAN CONSIDERATION. PERSONAL LOAN BORROWERS. FORECAST

6.2% 6.0% 5.8% 5.6% 5.4% 5.2% Dec-16

Mar-17

Source: RFi Group

Jun-17


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PERSONAL LOANS

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PERSONAL LOANS

Consumers clueless about credit scores Recent research conducted by comparison site Finder.com suggests a significant proportion of consumers have low awareness of credit scores. According to the study of 2,000 consumers, 2 in 5 believe a lower credit score is better, when the opposite is true. Other misconceptions found include: a third of consumers believe a pay rise would improve their credit score; one in four thought they could be penalised for checking their credit score too often; and another quarter didn’t know that apply for several loans or credit cards within a short space of time would negatively affect their credit score. Bessie Hassan, a spokesperson from Finder. com, believes consumers, especially younger ones, access their score only when their credit application is declined. “Younger people can easily get caught out by not paying off their bills on time or turning a

According to the study of 2,000 consumers, 2 in 5 believe a lower credit score is better, when the opposite is true. blind eye to their credit score until the need arises. It is often not until they make a big financial decision such as buying a property and applying for a mortgage or getting a car loan when they are faced with unexpected rejections,” she said. Izzy Silva, a spokesperson at credit bureau Veda, agreed that high credit awareness can significantly impact a consumer’s financial behaviour. “When an individual understands that a missed phone or credit card bill could hurt their chances of being approved for a loan down the track, they are more likely to be financially responsible,” said Silva.

Government cracks down on payday lenders In response to the final Small Amount Credit Contracts (SACC) review, which focused on the payday lending and consuming leasing (rentto-buy) sectors, the Federal Government has accepted most of the 24 recommendations. Payday lenders will no longer be allowed to charge borrowers repayments worth more than 10% of their net income, or lend to borrowers who have either defaulted or taken out two or more loans over a 90-period. Unsolicited loan offers will be also be banned, as well as

charging interest fees if a loan has been repaid early Rent-to-buy companies will be subject to a cap on total repayments, which will be equal to the base price of the good plus 4% of that price per month. These companies have also been banned from selling leases door-to-door. SACCs identifies payday loans as loans of up to $2,000 with terms of between 16 days and a year.

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PAYMENTS & DIGITAL

Payments & Digital Bankwest and Westpac jump on board Android Pay Bankwest and Westpac have announced they are now offering Android Pay to their customers. According to Jason Chan, Products and Marketing Executive General Manager at Bankwest, introducing Android Pay is an important step in the bank’s digital journey. “Android Pay is our first mobile payment offering and forms part of a multi-million-dollar commitment to improving our customers’ mobile experience,” he said. Mr Chan also said the move demonstrated that the bank is responding to customers’ changing needs. “Consumers increasingly expect all organisations, including banks and financial institutions, to be more flexible, digitally-focused and responsive to help them achieve what matters. Our smartphones are an essential part of our daily lives. They hold the key to our work, entertainment and social lives. Android Pay is just one example of us listening to and responding to our customers.” Meanwhile, Westpac is working closely with Google to extend Android to all St George, Bank of Melbourne and BankSA cardholders in 2017. “Our core focus is on providing great service to our 9 million customers by embracing digital opportunities and making it easy and convenient for them to bank with us. Our mobile customers want access to the best technology so we are delighted to add Android Pay, one of the world’s most popular mobile payment platforms, to our range of mobile payment options,” said George Frazis, Westpac Group Chief Executive, Consumer Bank. RFi Group’s digital banking survey in September 2016 shows both Bankwest and Westpac customers who own Androids would be more likely than average to use Android Pay if it were available.

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PROPORTION OF ANDROID OWNERS WHO ARE HIGHLY LIKELY TO USE ANDROID PAY By MFI 25% 20% 15%

14% 12% 10%

10% 5% 0% Westpac

Bankwest

Total

Source: RFi Group Digital Banking Survey 2016


PAYMENTS & DIGITAL

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PAYMENTS & DIGITAL

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PAYMENTS & DIGITAL

eftpos set to launch contactless payments Eftpos has announced that its cardholders will soon be able to make contactless payments via their smartphones. “We are now working with several members [banks] and successfully testing the token service in order to launch eftpos as a secure payment option in mobile wallets in 2017,” said Paul Jennings, CTO at eftpos Australia. “eftpos Tokens enable payments via mobile devices without compromising security, which provides consumers peace of mind.” According to a spokesperson at eftpos, the payments provider is working to integrate its

contactless feature with as many digital wallets as possible, which hypothetically should include current digital wallet offerings such as Apple Pay, Android Pay and Samsung Pay. Currently, users can store only their scheme debit or credit cards on their wallets. The move to contactless may increase the proportion of consumers who have an eftpos card attached to their primary transaction account. RFi Group’s latest survey of the general population in November 2016 shows only 25% of consumers have an eftpos card attached to their primary account, compared to 28% who have a Mastercard debit card and 44% who have a Visa debit card.

Citi announces new digital wallet app Citi has partnered with MasterCard to launch Citi Pay, a stand-alone digital wallet app. Available to Android owners, users will be able to make in-app, online and contactless payments across 33 countries. Citi has aimed to simplify the app by allowing users to log-in with the same ID and password they use for online banking.

“With Citi Pay, we are offering our customers flexibility wherever and whenever they choose to make purchases.” In addition to Citi Pay, Citi also offers Samsung Pay, which was launched in Australia earlier last year.

“Whether it is online, on a phone, or at a store, we want Citi customers to have seamless, convenient, and fast payment options wherever they go,” said Barry Rodrigues, Head of global digital payments at Citi.

With Citi Pay, we are offering our customers flexibility wherever and whenever they choose to make purchases.

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ABOUT RFi GROUP

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Covering 44 key global markets with regional offices in San Francisco, Toronto, London, Singapore, Hong Kong and Sydney, RFi Group consistently provides clients with tailored advice and independent intelligence relevant to their specific markets and business needs. EXCLUSIVE FOCUS ON BANKING AND FINANCE RFi Group’s expertise and deep understanding of the banking and finance sector delivers high-value outcomes. Our areas of expertise include: Retail Banking Mortgages Transaction Accounts Savings Accounts Consumer Lending Cards and Payments

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RFi Group’s syndicated research RFi Group is a global intelligence and media provider focused exclusively on financial services. We specialise in data and information gathering, customer based insight generation and business decision support for the world’s leading financial service providers. Our syndicated research is delivered via our Financial Councils model. Upcoming Australian Financial Council research includes:

COMING SOON 2016 December Australian Cards Council 2016 December Australian Consumer Lending Council 2016 December Australian Mortgages Council 2016 December Australian Digital Banking Program 2016 December Australian SME Banking Program

RESULTS OUT NOW 2016 September Australian SME Digital Banking Program 2016 September Australian HNW Banking Program 2016 October Australian Merchant Acquiring Program 2016 November Australian Affluent Banking Program 2016 November Australian Travel Cards Program 2016 November Australian Savings and Deposits Council- Transaction Accounts

Find out how you can access RFi Group’s latest business intelligence! For further information, contact Anthony Java on ajava@rfigroup.com or +61 2 9126 2617 50 ARB - RFi MEDIA

Profile for Adelle Grisaffe

Australian Retail Banker - January 2017 edition  

An RFi Group publication

Australian Retail Banker - January 2017 edition  

An RFi Group publication