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JUNE 2017 ISSUE

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

HAS AUSTRALIA REALLY GONE 25 YEARS WITHOUT A RECESSION?

RFi OPINION

WOMEN IN LEADERSHIP

TRANSACTIONS

08 Are consumers open to open banking? How about you?

19 Sophie Bialaszewski, Lloyds Banking Group

28 Aussie start-up to offer “bank account on steroids”


CONTENTS

12

08 16 19 22 26 RFi GROUP OPINION

RFi ANALYTICS OPINION

THOUGHT LEADER INTERVIEW

08 Are consumers open to open banking? How about you?

16 Has Australia really gone 25 Years without a recession?

22 Pete Steel, CBA 26 Andy Booth, Barclays

RFi GROUP INSIGHT

WOMEN IN LEADERSHIP

TRANSACTIONS

12 The death of cash – Are we any nearer?

19 Sophie Bialaszewski, Lloyds Banking Group

28 Aussie start-up to offer “bankaccount-on-steroids”


CONTENTS

28 31

35 37 41 44 SAVINGS

CARDS

PAYMENTS & DIGITAL

31 ASIC urges Aussies to collect unclaimed funds

37 Major banks restructure credit card rates on AMEX cards

44 HSBC launches Apple Pay

MORTGAGES

PERSONAL LOANS

35 Brokers lead other channels in loan renegotiation

41 Borrowers moving to personal loans and away from cards


RFi GROUP JUNE STA TEN SELECTED STATISTICS FROM DAILY STATS ON RFi GROUP WEBSITE (www.rďŹ group.com)

UK In the UK the average age of a first-time home buyer is

33 years-old

57% of UK consumers

6

would be very comfortable (8+/10) using a digital-only bank with no branch access

c t w

CANADA

41% of Canadian

consumers are open to trying biometric payments if made available to them

MEXICO

24% of consumers in

Mexico are planning to take up a credit card in the next 6 months

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INDIA

47% of urban banked

consumers in India have used biometrics in the course of managing the financial products or making purchases


ATISTICS HONG KONG

CHINA

64% of urban banked

23% of banked consumers

consumers in China consider the concept of a mobile wallet highly appealing

d

eir

in Hong-Kong consumers have used live chat services with a virtual assistant

#RFiGroupDailyStat

TAIWAN

20% of Taiwanese

banking customers find having a stable family life their most important financial goal

NZ

21% of Kiwis

would be likely to use biometric payments if they are available

AUSTRALIA Within a typical month in Australia, an average of

35% of credit card

purchases are made online ARB - RFi MEDIA 05


Join RFi Group & AB+F for the business banking event of the year, Australian Business Banking Summit, where all aspects of the business banking sector will be explored. Now in its 7th year, Australian Business Banking Awards is among one of the most highly regarded awards in the industry. Submissions are now open until June 23rd. Don’t miss your chance to promote the great initiatives your team are doing in this space.

For more information on these events, please contact: Event registration: James Harradine Business Development Manager, RFi Group jharradine@rfigroup.com / 02 9126 2616 Event & sponsorship enquiries: Lucy Ladbrooke Head of Events & Sponsorship APAC, RFi Group lladbrooke@rfigroup.com / 02 9126 2627


Welcome to the June 2017 Edition of the Australian Retail Banker, 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 begin this edition with RFi Group’s Opinion Piece addressing the topical subject of Open Banking, while our Insight Piece covers customer attitudes towards cash. Our June Women in Leadership interview is a great one with Sophie Bialaszewski, who is Head of Innovation Culture at the UK’s Lloyds Banking Group - undoubtedly a stand out in the banking innovation space - while the Thought Leader Interviews include Commonwealth Bank’s Executive General Manager of Digital, Pete Steel and Andy Booth, who heads up Current Accounts & FX for Barclays, as their Managing Director. RFi Group Analytics looks at Australia’s - really quite remarkable - 25 years

without a recession. No mean feat given the past few decades! Our product news covers ASIC urging Australians to collect their unclaimed funds; a move to personal loans from credit cards for many borrowers; the positive effects the recent Budget has had on alternative lenders; HSBC’s launch of Apple Pay; the Australian Prudential Regulation Authority’s announcement of increased regulations on home lending and the benefits of ING Direct’s brand new credit card. I hope you enjoy this edition and as always, thank you for your support of RFi Group. Have a great month,

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


RFi GROUP OPINION

ARE CONSUMERS OPEN TO OPEN BANKING? HOW ABOUT YOU? WORDS ALAN SHIELDS, RFi CONSULTING

I

n case you missed it, the over the last few years PSD2 - the snazzily titled Payment Services Directive (PSD2) - has been pushed through EU legislature and the ‘Entry into Force’ date of 12th January 2016 gives EU member states two years (until 12th January 2018) to implement the directive into national law. PSD2 paves the way for the sharing of bank data with third parties. Hot on the heels of PSD2, the UK market is abuzz with the concept of open APIs and Open Banking, which would require financial institutions to enable certified third parties to connect with them and access customer information about bank services, prices, service quality and customer usage. This would include transactional information such as account balances, recent payments, credit history, investments etc. across both consumer and SME customers. The vision behind this is that it will drive innovation and competition in the market. The UK’s Open Banking Working Group (OBWG) was launched by HM Treasury in 2015 to create an Open Banking Standard that would set out how open banking data is to be created, shared and used by the banks and the third parties. The OBWG originally recommended an implementation deadline of 2019 for full API specifications, but the Competition and Market Authority (CMA) has superseded this with a deadline in 2018.

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It seems that our politicians and regulators have their noses pointing in the direction of the UK market and there have increasingly been mentions of bringing similar legislation to the Australian shores. In November 2016 the House of Representatives Standing Committee on Economics recommended that we implement our own version of Open Banking by July 2018 as part of its recommendations on banking sector reform. Meanwhile the Productivity commission recommended (also in November) that banks build APIs to facilitate data sharing with customers.

In November 2016 the House of Representatives Standing Committee on Economics recommended that we implement our own version of Open Banking by July 2018. These recommendations underlined the political mood of bringing competition to the Australian landscape by ensuring that consumers have options available to them when it comes to switching banks. This mood came to life in the announcements in the May budget that banks would be compelled to share the data they hold on a customer when requested by that customer to do so.


RFi GROUP OPINION

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RFi GROUP OPINION

THINKING ABOUT THE POTENTIAL BENEFITS OF THIS LEGISLATION, HOW DO YOU FEEL PERSONALLY ABOUT CONSENTING TO SHARING YOUR PERSONAL FINANCIAL INFORMATION? UK consumers Millennials

Gen X

Baby Boomers

Total

70% 60% 53% 48%

50%

45% 44%

47%

40% 30%

30%

33%

31% 24%

20%

21%

16% 8%

10% 0% Very hesitant, I would be very unlikely to permit the sharing of my personal information in this way

Uncertain but open to understanding the benefits so I can make an informed decision

Very interested. I can see substantial benefits to me and would be willing to explore the opportunities

Source: RFi Group

The opening up and sharing of customer data with the intention of driving innovation and competition in the market sounds noble, but what does it actually mean in practical terms and in particular, what does it mean for consumers? Apart from the obvious security concerns that the banks would have in opening up customer data to third parties, there is the consumer consent angle. With Open Banking, consumers will need to give their explicit consent in order for 3rd parties to leverage their data (and then only in the specific ways consented to). Inherent in the legislation is the view that consumers want (or need) more from their financial service providers and that they would be happy to open up their data in this way without fear of privacy and security. So are they ready to give this consent? In RFi Group’s recent Global Digital Banking Council (GDBC) survey of 20,000 consumers across 10 key markets, we asked consumers just that. Are UK consumers likely to consent to allowing their financial institutions to share their data? The

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answer is that it depends greatly on the age of the consumers being asked to consent. Millennials (<35 years) for example are the most likely to give consent, with 31% being very interested in consenting and can see the benefit, with a further 53% being uncertain but keen to better understand the benefits.

Millennials (<35 years) for example are the most likely to give consent to allowing their financial institutions to share their data, with 31% being very interested in consenting and can see the benefit, with a further 53% being uncertain but keen to better understand the benefits. Almost one in two (48%) of Baby Boomers on the other hand are very hesitant about providing consent and only 8% are very interested.


RFi GROUP OPINION

So it would appear that the biggest threat to the banks lies in the targeting of what will become the most lucrative segment of the customer base in the next decade – the Millennials. And when it comes to the potential benefits, there is a clear winner for Millennials – “Being able to view all of your banking accounts and products held with different banks in one place” – which is account aggregation and is highly appealing to 37% of Millennials regardless of whether they are interested in consenting or not.

Privacy plays an important part in all of this and almost 60% of UK consumers agree that their privacy is more important to them than accessing better products and services. But is it that easy? Privacy plays an important part in all of this and almost 60% of UK consumers agree that their privacy is more important to them than accessing better products and services. In fact, even among Millennials, 41% would rather privacy than improved services. Here the banks have an advantage; on any given Sunday a consumer trusts their bank to hold and maintain the privacy and security of their personal information better than any other organisation. The chart beside shows what the proportion of consumers in Australia that strongly trust (8-10/10) various different types of organisation. And if you are thinking that Millennials trust banks less than other generations, then think again, 40% strongly trust banks compared to 32% of Baby Boomers and 31% of Gen X.

If you are thinking that Millennials trust banks less than other generations, then think again, 40% strongly trust banks compared to 32% of Baby Boomers and 31% of Gen X.

PLEASE INDICATE THE EXTENT TO WHICH YOU TRUST THE FOLLOWING INSTITUTION TO HOLD AND MAINTAIN THE PRIVACY AND SECURITY OF YOUR PERSONAL INFORMATION Banks

Telecommunications providers

Technology companies

New or emerging technology companies

50% 40%

So what’s next? Those banks with foresight know which way the wind is blowing and have already made preparations to operate in an open banking environment, with open APIs. On the consumer front, if we can solve for privacy and security, then account aggregation is clearly an attractive driver of consent among younger consumers and it is here that the banks must carefully choose their positioning. Leave the customer servicing to the new entrants and the technology companies and become the rails on which banking runs, or back your proposition and position of trust, innovate on the front-end service proposition and maintain brand relevance. Are you ready to decide?

Government agencies

30% 20%

35% 28% 20% 21% 15%

10% 0% Source: RFi Group

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RFi GROUP INSIGHT

THE DEATH OF CASH â&#x20AC;&#x201C; ARE WE ANY NEARER? WORDS AMIT KHAN, RFi RESEARCH

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RFi GROUP INSIGHT

T

The 2016 RFi Group Payments diary indicates cash still accounts for 40% of transaction volumes, but only 15% of the value. Furthermore, within the low value transaction space cash accounts for 43% of volume and 30% of the value.

he death of cash. Makes for great headlines. But is there substance to the statement? At RFi Group we have been asking customers about their attitudes towards cash for several years now; both in Australia and across global markets. With the upcoming changes to surcharging regulation, the New Payments Platform (NPP) and advent of new payments technology, things could change rapidly. But for the moment the hard data suggests we are still some way off, with most consumers in Australia still seeing a place for cash in their wallets, particularly for low value purchases.

The general trend was emerging markets had a higher percentage of customers agreeing they could imagine a cashless society.

Digging deeper into Australian consumer perspectives, suggests that cash is primarily used for low value purchases (transactions under $100). The 2016 RFi Group Payments diary, a study which records every single transaction made by over 1,000 consumers over a seven-day period, indicates cash still accounts for 40% of transaction volumes, but only 15% of the value. Furthermore, within the low value transaction space cash accounts for 43% of volume and 30% of the value.

When we asked consumers across 16 markets whether they could imagine a cashless society there were some stark differences. The general trend was emerging markets had a higher percentage of customers agreeing they could imagine a cashless society. For developed markets like Australia the figure was only around a third. Despite the proliferation of credit cards, contactless technology, widespread acceptance of electronic payments by merchants and recently the advent of mobile payments/in app purchases/online spending, most customers still see a place for cash.

Reaffirming below, even consumer preferences within a low value payment context are skewed towards cash â&#x20AC;&#x201C; 60% of Australian consumers indicated cash was their preferred means of payment for low value transactions. This contrasts with just 1 in 5 preferring cash at supermarkets and when paying for petrol. The differences in preferences across contexts are telling of the barriers at play â&#x20AC;&#x201C; chiefly surcharges and minimum spend limits.

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 2014

2015

2016

100% 80% 69% 62%

60%

58%

57%

54% 47% 38%

40%

37%

42% 35%

33%

33%

33%

30%

29%

27% 18%

20% 0% Mexico

China

Brazil Indonesia India

Hong Kong

Malaysia

New Canada Zealand

Singapore

Taiwan

US

Australia

UK

France

UAE

Average

Source: RFi Group

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RFi GROUP INSIGHT

AUSTRALIAN CONSUMERS: PLEASE SELECT THE METHOD YOU MOST PREFER FOR EACH PURCHASING SCENARIO

Cash

100%

Credit/charge card

4% 1%

5%

15%

14%

Debit card

EFTPOS/ATM Card

3% 1% 7% 15%

80% 27%

28%

PayPal

Other

4% 1% 8%

10%

20%

26%

15%

4%

60%

23% 25%

40%

31%

33% 60% 43%

20% 23%

19%

Shopping at a supermarket

Paying for petrol

33%

2%

0% Paying for low value purchases e.g. coffee, newspaper, snacks

Paying a taxi fare

Paying a taxi fare

Source: RFi Group

RFi Australian merchant data indicates a quarter of SMEs (<$10m revenue)* still prefer to accept cash payments over other forms, while over 40% impose minimum spend limits. These figures are even higher for the hospitality sectors (restaurants, cafes, bars etc.). Further a quarter of merchants indicated they had lost customers due to not accepting certain payment forms. While on the consumer side, over half had not completed a purchase due to a surcharge.

RFi Australian merchant data indicates a quarter of SMEs still prefer to accept cash payments over other forms, while over 40% impose minimum spend limits. So, cost is the central barrier preventing the use of electronic payments, especially in a low value purchase context. Upcoming surcharge regulation is likely to mitigate this. Combined with the advent of the NPP, improvements in mobile payments technology, and the simplification of

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recurring/card on file/in app payments should provide the impetus for a further decline in cash usage.

Cost is the central barrier preventing the use of electronic payments, especially in a low value purchase context. Upcoming surcharge regulation is likely to mitigate this. However, a base level of demand for cash is likely to remain for some time. There are behavioural/attitudinal barriers at play, with a subset of consumers preferring cash due to security, convenience and privacy reasons (non-trackable); the underground economy still accounts for a notable proportion of cash holdings in Australia. As long as cash remains costless and anonymous, there will be demand for it.

*Note the RFi Group merchant data is not representative of the Australian SME market, but accounts for a wide range of merchants across revenue bands


RFi GROUP INSIGHT

A BASE LEVEL OF DEMAND FOR CASH IS LIKELY TO REMAIN FOR SOME TIME. THERE ARE BEHAVIOURAL/ATTITUDINAL BARRIERS AT PLAY, WITH A SUBSET OF CONSUMERS PREFERRING CASH DUE TO SECURITY, CONVENIENCE AND PRIVACY REASONS. AS LONG AS CASH REMAINS COSTLESS AND ANONYMOUS, THERE WILL BE DEMAND FOR IT.

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RFi PERFORMANCE ANALYTICS OPINION

HAS AUSTRALIA REALLY GONE 25 YEARS WITHOUT A RECESSION? WORDS CHARLES HIGBY, RFi PERFORMANCE ANALYTICS

I

believe it is just as important to understand the definition of something being measured as the measurement itself. The definition of a recession provides a fantastic and topical example. There have been numerous references in the press to Australia’s remarkable record of going 25 years without a recession. These assertions are based on a recession being defined as two consecutive quarters of negative growth in GDP. This popular definition of a recession is attributed to US economist Julius Shiskin who first published this in a New York Times article titled The Changing Business Cycle in 1974. Having dug up the article from the New York Times archives I discovered that Shishkin’s definition was significantly more nuanced. He indicated a recession occurs when “there has been an extended, substantial and widespread decline in

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aggregate economic activity or depth, and diffusion”. He then helpfully translates this into the following six, easily understood quantitative definitions: 1. Duration: Declines in real Gross National Product (G.N.P) for two consecutive quarters 2. Duration: A decline in industrial production over a six-month period 3. Depth: A 1.5 percent decline in real G.N.P. 4. Depth: A 1.5 decline in non-agricultural employment 5. Depth: A two-point rise in unemployment to a level of at least 6 percent 6. Diffusion: A decline in non-agricultural employment in more than 75% f industries as measured over six-month spans, for 6 months or longer


RFi PERFORMANCE ANALYTICS OPINION

Understanding that there are alternative definitions to measure a recession I wondered whether Australia’s 25-year record of no recessions would hold true if we considered some of the alternatives put forward by Shiskin. At its core, the concept of a recession refers to a weak economic phase that deviates from historical trends. I wondered what an alternative RFi Analytics definition of a recession might look like. Rather than relying on a single measure like GDP or unemployment I decided to throw the wealth of ABS metrics, RFi Analytics proprietary data at the problem.

Taking into account the “three key dimensions of a recession, known as the ‘three Ds’: duration, depth and diffusion”...the ten measures included GDP and unemployment as well as consumer sentiment, credit delinquencies, consumer purchases, consumption expenditure and compensation of employees. After some modelling, and taking into account the “three key dimensions of a recession, known as the ‘three Ds’: duration, depth and diffusion” (Fiedler 1990)1, I settled on ten measures. These included GDP and unemployment as well as consumer sentiment, secured and unsecured credit delinquencies, consumer purchases, consumption expenditure and compensation of employees.

Definition used

What I found

Has Australia gone 25 years without a recession?

1. Duration: Declines in real Gross National Product (G.N.P) for two consecutive quarters

As stated earlier, using this definition Australia hasn’t had a recession in over 25 years.

Yes

2. Duration: A decline in industrial production over a six month period

Using this definition Australia has experienced several recessions – the longest of which started in March 2014 and ended in June 2015.

No

3. Depth: A 1.5% percent decline in real G.N.P.

We never had a recession under this definition.

Yes (much longer actually)

4. Depth: A 1.5% decline in non-agricultural employment

The only recession identified by this definition is the same as that using two consecutive quarters of negative GDP.

Yes

Average result of the 4 definitions

Yes (3/4)

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RFi PERFORMANCE ANALYTICS OPINION

RFi Performance Analytics, State of the States Report Assessment of Economic Phase based on all 10 metrics National

NSW

VIC

SA

QLD

WA

Current Quarter

Adverse

Adverse

Adverse

Adverse

Adverse

Adverse

Previous Quarter

Adverse

Positive

Neutral

Adverse

Adverse

Adverse

Last Year

Positive

Positive

Neutral

Neutral

Neutral

Adverse

Previous Year

Neutral

Positive

Positive

Neutral

Neutral

Adverse

Source: RFi Performance Analytics

As the five largest states in Australia tend to act as discrete economies I conducted this analysis for each state as well as at a national level. The result is the following “RFi Analytics, State of the States” report. The idea was to identify nationally and by state, where there has been a substantial decrease in economic activity affecting wide portions of the economy. If both the current and prior quarter are adverse it means that 7 or more of the indicators were negatively outside the historical bounds.

Only Victoria and New South Wales would be seen as in a positive cycle for the last two quarters – although the most recent quarter would suggest both may be experiencing a decrease in economic activity. As this is more of a thought experiment than a formal paper I will forego getting into the detail of the methodology I used, including the bounds I used to define a “deviation from historical trends”. The ultimate goal here was to provide something that is easy to digest. My key take outs when using this approach and definition: • At a national level, we might be entering a period of weaker economic activity having been propped up to some extend by NSW and Victoria for the last two years. • Western Australia could be construed as “being in recession” • South Australia and Queensland would also be defined as being in a recession based on the last two quarters • Only Victoria and New South Wales would be seen as in a positive cycle for the last two quarters – although the most recent quarter would suggest both may be experiencing a decrease in economic activity.

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Now I am not an economist and agree that almost anything can be proven when playing with assumptions, definitions and statistics. However, this exercise will hopefully demonstrate two important things I have learnt in 15 years of conducting industry portfolio benchmarking. 1. Understanding the definition of a metric is just as important as understanding the result 2. Just because a metric, whether it is market share, a recession or delinquent accounts has “always” been defined in a particular way, do not assume this is the best / only definition. Often the best insights come from looking to redefine the inputs into any metric.

I do not think Australia is about to enter a recession based on the commonly used definition. I do however think it is important to understand that each of the major states act as a discrete economy. Finally, I do not think Australia is about to enter a recession based on the commonly used definition. I do however think it is important to understand that each of the major states act as a discrete economy. If you rely on the traditional definition of a recession to make decisions and forecasts for your business or in your models, it is worth considering using a proxy value such as “Final Consumption Expenditure” which represents about 70% of GDP to get a quarterly snapshot of how each of the states are doing.

1 Fiedler, E. R. (1990), The Future Lies Ahead, in: Klein, P. A. (ed.), Analyzing Modern Business Cycles, Essays Honoring Geoffrey H. Moore, Armonk, NY: M. E. Sharpe.


RFi GROUP WOMEN IN LEADERSHIP

Sophie Bialaszewski isn’t your usual digital leader; neither is how she got there. With an MSc in Public Policy and a background in communications, her differentiator is her ability to combine culture change, innovation and communications to deliver campaigns and programmes that inspire, excite and help people experience a new way of working.

I’ve not had a traditional route to become a digital leader in a large bank but what this has allowed me to do is to become a translator and use my skills to create experiences that are inspiring people to work in new ways.

Sophie Bialaszewski Head of Innovation Culture, Lloyds Banking Group

WORDS CHLOÉ JAMES

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RFi GROUP WOMEN IN LEADERSHIP

Sophie Bialaszewski isn’t your usual digital leader; neither is how she got there. With an MSc in Public Policy and a background in communications, her differentiator is her ability to combine culture change, innovation and communications to deliver campaigns and programmes that inspire, excite and help people experience a new way of working. Sophie’s vision is that innovation will be everyone’s job at Lloyds Banking Group and she has spent the last 3 years building the internal capability and team to bring this to life. She is trail blazing new initiatives like the hac-kit (think hackathon in a box with a mission impossible count down) to foster intrapreneurship, upskilling colleagues with FinTech talks and films, and connecting colleagues with startups through espresso martinis (meetups) and mentor matching schemes. The programmes Sophie’s team run provide colleagues with the tools and techniques they need to DIY innovation as the future leaders of the bank. Sophie was also instrumental in developing Lloyds Banking Group’s Innovation ecosystem with 14 FinTech collaborations including 3 Global accelerators, start-up innovation challenges with the Government and supporting women in FinTech with Innovate Finance. Her talent is recognised amongst the external community; where she has been listed in the Innovate Finance 100 women in FinTech, Innotribes Global Power Index for FinTech and is featured on the FemTech Leaders’ website. Recently, RFi Group spoke to Sophie about what makes her tick. And here, is what she said. How did you get to where you are today and what, or who, has been your greatest influence in business? I’ve not had a traditional route to become a digital leader in a large bank. My background is in public affairs,

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communications and education but what this has allowed me to do is to become a translator and use my skills to create campaigns and experiences that are inspiring people to work in new ways. My role today is Head of Innovation Culture at Lloyds Banking Group where I have two main remits: (1) to make innovation everyone’s job; and (2) support the next generation of entrepreneurs in the UK through supporting early stage fintech start-ups.

From the outset of my career (15 years ago) I worked with the tech giants and the government to help the UK view digital as an enabler of growth. My biggest influences have been digital and fintech. From the outset of my career (15 years ago) I worked with the tech giants and the government to help the UK view digital as an enabler of growth and today I am looking at how we enable people to be digital leaders and ‘intrapreneurs’. Our collaborations with global accelerators like startupbootcamp are enabling rich culture exchange between a large corporate like Lloyds Banking Group and start-ups, and the exchange of views, expertise and knowledge is having a real impact on changing ways of working. I love looking to what’s on the horizon and how best to prepare people to be successful in the future. What is the driving force behind your career goals/aspirations? For me it’s always about doing something I love, enjoy and I want to learn more about. I’m a total geek and love learning. The reason I was drawn to culture is that you get to empower people to think differently, to create an environment that enables talent and you

get to work with great people across the business and outside. Have you ever made a business decision you may have done differently with hindsight, and can you share it? And, what would you say is your greatest professional achievement to date? Wow, big question! I tend not to dwell on what’s happened in the past but to learn from it. I think managing teams of people is one of the hardest things to do but also the most exciting. In hindsight and with experience you learn to read the signs better from your team and from audiences when you’re pitching ideas. So, my advice to my younger self would be to listen more and ask more questions. One of the biggest achievements I am most proud of is our Lloyds Banking Group FinTech Mentoring programme which Innovation Managers Kathryn Harris and Maxine Leigh in my team have been instrumental in making happen. It gives direct value to start-up founders and our most senior colleagues through matching relationships that facilitate deeper discussion, learning and opportunity; the impact of which reaches far and wide.

In hindsight and with experience you learn to read the signs better from your team and from audiences when you’re pitching ideas. One of my favourite stories is about a fintech start-up called Mobillity, a proposition which uses existing data to save customers money and improve financial well-being (by analysing their bank transaction records and linking with other sources to reduce their utility, phone, gym and other re-occurring costs). Following an Espresso Martini event that Lukas Zörner (the founder of Mobillity) joined, he was mentored by an interested senior leader in Lloyds.


RFi GROUP WOMEN IN LEADERSHIP

Lukas then successfully secured a place on thestartupbooptcamp FinTech 2016 cohort and has since tested his proposition in our customer labs. How cools is that! We are helping and supporting the next generation of entrepreneurs in the UK and enabling culture exchange and a growth mindset. What do you do to keep evolving your career, to ensure a fulfilling and successful longevity? Always having an eye on what’s next. As part of an innovation team you cannot stand still, there is always something different to look at and learn from. We have to continually evolve the vision and capability of a team to not only deliver what you need to today but ensure you are skilling yourselves up for the future and constantly pushing and trying new things to challenge the status quo. Getting out and about outside your organisation, networking with people from across industries also keeps the mind fresh. How do you achieve a work/life balance and what activities do you participate in outside your working life, that you see contributing to your business success?

I am lucky that the bank has a great attitude towards empowering people to work in an agile way so I have a flexible working pattern that works for me and my family. I’m a new mum so work/life balance is important to me. I am lucky that LBG has a great attitude towards empowering people to work in an agile way so I have a flexible working pattern that works for me and my family. Whilst I was on maternity leave I joined an adult drama class, something I have wanted to do for a long time – it was

always something I loved at school but never really returned to. It’s a great way to put yourself out of your comfort zone, and taking on new personas helps you view life from a different angle. And, honestly performing on stage is so super scary it makes panels and conferences seem easy. It’s also a great way to meet a diverse group of people, have fun and build your confidence. Do you mentor others? And, what have you learnt in the process. I do yes and I also have mentors which is great. I mentor within and outside of LBG and when you are able to create these relationships organically you create sponsorship of each other and friendships. A great mentor can also challenge how you think. I remember talking to a mentor about a situation and I said, I’ll just keep on trying. He said, “No. Stop, try something different as what you’re doing is not working”. It was a great piece of advice that I remind myself of when faced with a challenging situation. What advice would you give to young women who want to success in the workplace and what do you see as the biggest challenge for future generations of business women? I am an optimist – the future is whatever you want it to be. A friend of mine once said to me do what you want to do and you’ll be what you want to be. It’s so true. For young men and women I would say work for an organisation that values you, that you believe in and that empowers you. Be true to yourself in your leadership style – we all have a natural way of being and behaving and although you do need to be able to adapt your approach, where you will have the most success in bringing people along with you on the journey is when you are yourself. I am not the typical leader you’d find in financial services, so what! I’ll use my differences to my advantage and so far its worked brilliantly. I’d also advise them to work in diverse

teams – the more diverse the team the richer the ideas, the experiences and the skills. The better the outcome.

Be true to yourself in your leadership style – we all have a natural way of being and behaving... where you will have the most success in bringing people along with you on the journey is when you are yourself. 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? Always ask why – whether you’re being asked to do as task, present at a conference, whatever it may be. Having the context of why you are being given an objective will help you be successful. Asking why gets you the information that you need but also challenge those above you to clearly think through what they are asking you to do.

By helping others to grow and developing talent you will learn along the way and people will identify you as an enabler. I’d also add that you should help and collaborate with the people around you. We are not successful on our own, by helping others to grow and developing talent you will learn along the way and people will identify you as an enabler.

To read the full WIL series and all past Australian Retail Banker editions, feel free to visit the archive centre on our website or follow @RFiMediaGRB on Twitter.

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THOUGHT LEADER INTERVIEW

Pete Steel Executive General Manager,Digital, CBA

A HELPING APP WORDS CHRISTINE ST ANNE

Recently, the Commonwealth Bank of Australia rolled out a number of new app features. Improving and enhancing mobile banking is of course a consistent strategy in financial services as banks embrace the digital world. According to RFi Group data, banks still have ample of opportunities to improve on existing financial health tools. Among Australians using mobile banking apps only 10 per cent were aware of financial health tools being available on their app. Furthermore, amongst this 10 per cent only 45 per cent were satisfied with this app feature. Clearly there is scope to improve current app features, however, what was interesting about CBA’s initiative was that the new innovations focused on money management – a first in the Australian market. According to Pete Steel, the initiative was a “real step change for us” and “a new era for the bank”. “We are going beyond just providing

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products and services. We want to really help customers to adopt better financial habits,” Steel said. The new features aim to help customers manage their money and meet their financial goals particularly on the back of “some worrying statistics” that emerged from a series of surveys undertaken by CBA.

We are going beyond just providing products and services. We want to really help customers to adopt better financial habits. The research revealed that more than a third of Australians are spending more than they earn each month. The data also found that more than 56 per cent of people would not have enough savings to handle a temporary loss of income. Moreover, based on 2.7 million customers, where CBA was the primary banking relationship, one in three

could not quickly access $500 in cash or credit in an emergency and one in three households would be unable to find $500 in an emergency. Not only were Australians overspending, but the new data revealed this overspend contributed to a large proportion of Australians struggling with financial wellbeing. Around 46 per cent believe they were not progressing towards their financial goals and just as many (45 per cent) of Australians were uncomfortable with their current level of spending. The human condition At the same time, Steel said that further surveys showed that 73 per cent of Australians want banks to do more to understand their needs and concerns and 72 per cent want their bank to help them manage their finances in a rapidly changing world. “These statistics are actually quite harrowing. A year ago, we decided to do


THOUGHT LEADER INTERVIEW

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THOUGHT LEADER INTERVIEW

something about it. As Australia’s largest bank we have a role to play in helping people with their finances. We have four million customers logged into our app, which gives us a real opportunity to help people with their financial wellbeing.”

As Australia’s largest bank we have a role to play in helping people with their finances. The new app features include Transaction Notifications and a Spend Tracker (see images below). Transaction Notifications include real time credit card transaction alerts that give customers insights into their daily spend. The Spend Tracker provides a monthly summary of credit card transactions that are categorised which shows customers where their money is going. The bank is also triallling a number of other initiatives in the CommBank Lab including a savings challenge which compares a customer’s current transaction account spending against their average for the prior three months so that they can track and improve their savings over time. A ‘savings jar’ is another initiative being tested which allows customers to set aside “pots of money” for unforeseen events by rounding up daily transactions. Customers will have

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access to this money whenever they need it.

and old are spending more than they earn.

“These four functions are a direct response to our customers’ concerns and uncertainties. Each product has been designed to ensure we meet a customer need – from account security, to real-time reminders of your spending habits, to helping you save money and paying your bills on time.”

“It goes to the human condition. It’s more exciting to purchase products. Understanding money is not really a fun activity. This means that across the board, people are not connected with their money and with the choices they make.”

Understanding money is not really a fun activity. This means that across the board, people are not connected with their money and with the choices they make. The first two features are already available to customers but the remaining two won’t be widespread given that they are still in experimentation and only targeted to a subset of the bank’s customer base. “This capability allows us to work with and co-create with a subset of customers to make changes. Unlike our main CBA app which needs a lot of care to make it run smoothly, these apps allow us to change things quickly based on the feedback from our customers.” Interestingly, the statistics on financial hardship cut across all demographics, from over 18 years of age, both young

“We chose an app to address this issue and obviously, the younger demographic tend to use apps. We are working hard with both our young and elderly customers in cities across Australia to address the challenge of spending more than you earn.” With the older demographic in mind, the new apps will be supported across the bank’s “excellent branch network”. “People need face-to-face conversations. There is no substitute for human contact.” The CBA move highlights an interesting shift for Australian banks, that is, playing more of a role as a money manager than just simply offering products. A first mover According to global research firm Forrester, while Australian banks have done well in terms of offering functional mobile banking features, they have lagged in offering money management functionality in their mobile banking. “Globally banks are moving beyond


THOUGHT LEADER INTERVIEW

the traditional offer of transactional banking. They are now helping their customers with managing their money and financial goals. It’s now about driving deeper customer engagement,” Forrester analyst Zhi Ying Ng said. “We have not really seen this trend in Australia until now. The features offered by CBA has made the bank a first mover in this market.”

I can’t speak on behalf of what the other banks have done but as Australia’s largest bank with a big focus on innovation, we would expect to lead on this initiative. According to Steel, CBA has certainly been the first to crack the market in money management. “I can’t speak on behalf of what the other banks have done but as Australia’s largest bank with a big focus on innovation, we would expect to lead on this initiative.”

Behavioural sciences and analytics are now part of our business... It’s important to understand why customers behave the way they do and how we can encourage ways to adopt good financial behaviour. The strategy also draws on the bank’s growing expertise in behavioural science and analytics. In fact the there is a behavioural sciences group within Steel’s digital team. “Behavioural sciences and analytics are now part of our business. These approaches are measurable and ensure

that our products make a measurable difference to customers’ needs. It’s important to understand why customers behave the way they do and how we can encourage ways to adopt good financial behaviour. “By providing our customers with these experiences we can show them the consequences of their decisions and perhaps encourage them to change their behaviour by better managing their cash flow for example.” Forrester’s research also highlighted the growing role of global fintechs as first movers in providing money management tools. One US-based fintech is already offering such tools using artificial intelligence. These fintechs will continue to disrupt the mobile banking sector with Ng noting that Forrester’s research highlighted that customers were open to using fintechs for parts of their banking.

Money management tools like this are the next frontier for mobile banking. The bank’s vision “Money management tools like this are the next frontier for mobile banking. It’s crucial banks move to include these features, otherwise the banks risk losing their customers to the fintechs,” she said. Steel acknowledges the agility of fintechs and their success in providing a good customer experience. However, in this initiative, CBA has provided a “new level of experience to its customers and quipped “we think fintechs will emulate our functionality”. Forrester’s Ng also highlighted the broader issue of trust that banks are now grappling in Australia. “The current media focus around issues of trust and culture in banks has not portrayed the sector in the right way. Offering features

that go beyond products and services should regain trust and drive a better relationship with customers.”

We are excited that this is a first in Australia. It is in step with the purpose to really help our customers that need us the most by using our scale in analytics and co-creating with them to ensure we are hitting the mark. For Steel, it simply goes to the “heart of the bank’s vision” to help its customers manage their finances. “We are excited that this is a first in Australia. It is in step with the purpose to really help our customers that need us the most by using our scale in analytics and co-creating with them to ensure we are hitting the mark.” Steel has spent 12 years with the bank and now leads a team of 900 people that includes “45 customer-focused start-up scrum teams”. The group provides digital support to all the bank’s businesses including retail, insurance, funds management and small business. He will also be off to the Silicon Valley this month to meet global banks and the “tech innovators who are at the forefront” in customer engagement. “The bank is going from strengthto-strength with its technology and applying it to address real customer problems. But it’s important not to be complacent. Ultimately our customers will judge us by the extent to which we help them. I like to believe my team is making a positive impact.”

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

U Managing Director, Transactional Business, Barclays WORDS SARAH HOLLINSHEAD

26 RFi ARBMEDIA - RFi MEDIA

K banking is at an inflection point and Barclays is ready to seize the opportunity.

Open banking was the phrase on everyone’s lips at the RFi Group Global Digital Banking Conference – Europe Edition last month. Big banks, challenger banks, fintechs and other industry players all shared their views on the implications for the consumer, fraud, and the financial services eco-system at large. Of the many insightful speakers of the day, Andy Booth, Managing Director, Current Accounts & FX for Barclays presented his view on impending changes to the industry. RFi Group’s Sarah Hollinshead sat down with Booth to understand fully how Barclays are positioning themselves and responding to what is viewed as one of the biggest shifts in financial services history.


THOUGHT LEADER INTERVIEW

Overall, the outlook is very positive when Booth predicts the future of the banking eco-system, and Barclays’ place within it. “You will see a proliferation of different types of providers, both around current accounts and payments. There is no reason why Barclays cannot be at the forefront of that. The best elements of the new innovations will be built into or accessible through Barclays.” Booth draws attention to the benefits that customers can receive through open APIs, and as the ‘caretakers’ of a mass amount of consumer data, Booth believes Barclays is able to better deliver customer experiences, and ultimately win.

of innovation in mobile banking, in particular, compared to some of the newer, app-based players in the market, Booth believes the gap is not as wide as the media may suggest. “We are proving through innovations at Barclays that we can more than keep up with competitors on mobile banking and keeping millennials happy. Through our “Launchpad” function, we are evolving our mobile banking capability, testing new features amongst several thousand consumers. We fail fast and learn fast.”

digital and outside of digital. We have improved our overdraft proposition, our range of cash back and value offers and also helped young people with the skills they need to go forward into work via LifeSkills. But the best enhancement was building a bigger presence on campus. The face-to-face element here is very powerful.” In the midst of discussing the relative merits of branch vs digital channels for the customer, Booth exclaims that this is an archaic and industry-only way to look at the financial services offering anyway!

We are proving through innovations at Barclays that we can more than keep up with competitors on mobile banking and keeping millennials happy. We fail fast and learn fast.

“Throughout their journey, customers do not look at it in terms of channels. The more you move away from that lens, the better you can be at making your customers happy.”

As custodians of customers’ data, Booth believes that not only are Barclays central to delivering better services, they are responsible for the safety of consumer’s personal information.

Often the cumbersome branch network of the traditional banks is referenced as a limiting factor to fast innovation, yet Booth believes the branch feedback loop is invaluable for bettering customer experiences.

“Going forward, we want to be seen as the place where you can continue to be safe, both with money and data. With proliferation of services in the market and more richness of data comes complexity, and we will be at the forefront of explaining to customers how to protect themselves and make the most out of opportunities.”

“We are blessed with having a huge network of colleagues that meet customers every day. To be an outstanding bank, you have to listen to customer facing employees in contact centres or branches, as the human relationship is very important. Partnered with a strong digital side, this is the best way to serve customers.”

“It is easy to have very experienced retail bankers, but in reality, you need a rich balance of people. We actively recruit and promote a broad and diverse range of people and they are well integrated into the team. In the last 12 months, we have run very special projects, managed and delivered solely by millennial employees for example, without any wider bias or input. They have delivered some fantastic work, presented directly to senior stakeholders and bank management.”

Booth explains the unique level of trust that consumers have in their banks, and RFi Group data corroborates this (see page 16 for more information). Open banking could expose customers and companies to a number of risks, and Barclays believe they can play a pivotal part in combatting that risk.

Barclays have seen the pivotal role of attracting the next generation, arguably the most digitally savvy, through a physical presence. Onboarding the student population and beginning that relationship early has been a large focus.

“We are custodians of customer data and we aim to keep customers at the heart of everything we do. Open banking provides a fantastic opportunity for everyone to enrich customer experiences. Through incorporating a range of services and information, we at Barclays will gain broader insights on the customer, and this will translate into more meaningful actions.”

When questioned on the response time

“We are now the number one provider of student bank accounts in the UK. We have done a range of things in both

Another myth that Booth was keen to debunk was the illusion of a bank run by a few white-haired, middle aged men trying to serve a population that they do not understand. More and more, big banks are proudly taking on a more diverse employee to better serve the UK population.

With a career in the financial services sector spanning more than 20 years, and now looking after some of the most potentially disrupted areas of retail banking: current accounts and international payments, Booth is excited by the changes to the industry, and anticipates a fun ride ahead. “It is a fascinating place to be. The next 3-5 years are going to be the most exciting period for banking, both for customers, bankers, and for Barclays.”

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TRANSACTIONS

Transactions

Samuel Nixon and Matt Jones

Aussie start-up to offer “bank-account-onsteroids” WORDS REGGIE ALDERSON

M

osaic, an Australian fintech company, has announced plans to meld investment, transaction, and savings accounts into one product that will offer consumers a “bank account on steroids.” According to Mosaic co-founder and CTO, Matt Jones, the product will give consumers a better return on investments in comparison to the rates offered by other institutions, allowing them to invest in any asset class or be risk profiled. Users are charged a small fee to use the platform and after linking their transaction, savings and investment accounts, users have their spending patterns analysed. The Mosaic platform will then assign an asset

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Image source: Mosaic

According to Mosaic co-founder and CTO, Matt Jones, the product will give consumers a better return on investments in comparison to the rates offered by other institutions, allowing them to invest in any asset class or be risk profiled. allocation, which can be changed at any time. An investment structure is then recommended to the user based on their needs and risk profile. Users can also create their own structure. “We’ve had incredible feedback so far with the Mosaic beta waitlist tripling in size in less than a week. We are deep in the production phase and are aiming to begin consumer trials at the backend of the year,” said Co-Founder Sam Nixon.


TRANSACTIONS

Cashless society a reality if trends continue WORDS REGGIE ALDERSON Between 2010 and 2016 the total amount of cash payments reported by Australian merchants has dropped 46% according to new research by East & Partners. The research report revealed that in the same period, credit card payment totals decreased by 11%, while debit card receivables increased by 56%. East & Partners believes that cash payments for all Australian merchants will drop below 5% as a proportion of all receivables by 2019, and 2% within the next five years. “Backed by recent figures from the Reserve Bank showing ATM withdrawals falling to all-time lows, East’s research indicates that cash is increasingly vanishing as a preferred payment method,” East and Partners Head of Markets Analysis, Martin Smith, said. “As consumers continue to embrace platforms such as wearables, contactless payments and mobile payments, and they’re further integrated into everyday life, the need to carry cash will continue to diminish at an accelerated rate,” said Smith.

Between 2010 and 2016 the total amount of cash payments has dropped 46% according to new research by East & Partners... East & Partners believes that cash payments for all Australian merchants will drop below 5% as a proportion of all receivables by 2019, and 2% within the next five years.

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TRANSACTIONS

New Zealand consumers move away from cash as digital and contactless payments rise WORDS HUW GRIFFITHS The proportion of New Zealanders carrying cash is on the decline with more than two-thirds of the population stating they do not carry cash at all. Cards are now the preferred method of payment among New Zealanders, with a survey conducted by Mastercard finding that over 90% of New Zealanders preferred to pay via cards. Peter Chisnall, Country Manager for Mastercard’s New Zealand and the Pacific Islands, stated, “New Zealanders are embracing ways to pay that are fast, convenient and secure. Acceptance of card payments, and increasingly contactless payments, means New Zealanders are less reliant on cash for everyday transactions.” Although New Zealanders are embracing more emerging technologies, like mobile payments, there is still a long way to go before they become mainstream like cards. RFi Group data shows there is high awareness of mobile payment methods however actual usage is still low. For example, 62% of New Zealanders are aware of contactless payment via mobile phones on payment terminals, however, only 13% of these respondents actually use the payment method. The data illustrates that there is significant work to show the advantages of new payment technology for both consumers and retailers.

MOBILE PHONE BASED PAYMENT AWARENESS AND USAGE Awareness

Usage

100% 80% 60%

62% 45%

40% 20% 8%

6%

0% Contactless payments by tapping mobile phone on payment terminal

Contactless payments via an app downloaded onto your mobile phone

Source: RFi Group New Zealand Payments Program April 2017

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SAVINGS

Savings

ASIC urges Aussies to collect more than a billion dollars in unclaimed funds WORDS REGGIE ALDERSON

A

ustralians are being called, by the Australian Securities and Investments Commission (ASIC), to claim funds which remain in dormant accounts. Peter Kell, ASIC’s Deputy Chairman, has advised all Australians to search their name on ASIC’s MoneySmart website in order to claim their part of the $1.1 billion which has been neglected in Australian bank accounts, shares and life insurance. Typically, money in these accounts becomes lost when people move overseas or move house and forget to update their details with a financial institution. Kell explained that although unclaimed funds are transferred to the Commonwealth, if they are unclaimed for more than 7

The proportion of unclaimed funds ranges from state to state however savers in NSW have the most to gain with more than $350 million in unclaimed funds. years there is no time limit for funds to be claimed. In 2016 ASIC saw more than 16,000 successful claimants made, amounting to $85 million. The proportion of unclaimed funds ranges from state to state however savers in NSW have the most to gain with more than $350 million in unclaimed funds. ASIC is even offering services to help Australians who find they have money in unclaimed funds manage them. Kell explained, “If you find you have unclaimed money, ASIC’s MoneySmart website offers free and impartial financial guidance and online tools to help you use it wisely and make the most of your money.”

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SAVINGS

More than 30% of savers identified that an app which consolidates information across different bank accounts for budgeting purposes to be appealing, which suggests that the new feature Acorns has introduced may not only appeal to millennials but savers in general.

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SAVINGS

Acorns launches personal finance app WORDS REGGIE ALDERSON In order to target Millennials the Australian micro-investment company, Acorns, has added a new feature to its app called “My Finances.” “My Finances” allows users to identify whether they are spending too much on certain purchases, such as entertainment, shopping, and meals. Acorns Managing Director, George Lucas, said the artificially intelligent budgeting tool is the first of its kind as it requires little manual effort from the user. “The machine-learning within Acorns allows us to provide a personalised user experience and insights without additional information being entered manually - a budget for example,” said Lucas. Lucas also said the new feature has the capacity for future enhancements. “When we built this capability, we built it so that we were able to link natural language processors and chat machines into it so that one day you might be able to Facebook message the app and ask it if you can go out for dinner that night and it will look at your expenses and say, ‘No, you can only go to the golden arches.’” RFi Group data from the Australian Savings and Deposits Council shows that the proportion of savers who have been using mobile applications to manage their savings has been slowly increasing since 2016. Moreover, more than 30% of savers identified that an app which consolidates information across different bank accounts for budgeting purposes to be appealing (6-10 out of 10), which suggests that the new feature Acorns has introduced may not only appeal to millennials but savers in general.

HOW DO YOU MAINLY MANAGE YOUR LARGEST SAVINGS ACCOUNT? Through a mobile app 20% 15% 10%

14% 10%

11%

5% 0% Mar-16

Jul-16

Mar-17

Source: RFi Group Australian Savings and Deposits Council, Mar-17

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SAVINGS

Tracking savings through an app helps WORDS CHARLOTTE NEWELL TrackMySPEND, is a savings app which was created by ASIC to help Australians manage their finances and savings. This app was recently used in a study to judge the effectiveness of budgeting apps in helping Australians save. This study, conducted by ME Bank, surveyed participants about their savings habits and attitude towards managing finances before and after their use of the TrackMySPEND app. The results of the study revealed a positive correlation between the ability to save and budgeting apps. One participant, Matthew a 26-year-old warehouse worker, described the positive impact the use of this app had on

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The results revealed a positive correlation between the ability to save and budgeting apps. his savings as, “Now that I have some goals to work towards, I have more incentive to watch my spending and grow some savings… It inspired me to start savings for a house, or even maybe a new car.” While the study demonstrates the positive influence budgeting apps can have on savings patterns, ME Bank Head of Deposits and Transactional Banking, Nic Emery, attests the key to saving is identifying your own key patterns, whether this be through an app or another means. By identifying the key patterns Australians can make more informed decisions about how choices will affect their finances.


MORTGAGES

Mortgages WORDS REGGIE ALDERSON

Brokers lead other channels in loan renegotiation

A

recent KPMG survey has revealed that home loan borrowers who applied via a broker are more likely to renegotiate their interest rates after five years. The Australian Home Loan Market report surveyed 622 borrowers who earn between $70,000 and $250,000 per year, and found that 44% of respondents used a broker to apply for their mortgage. Of those who used a broker, 67% renegotiated their mortgage rates at least once every five years. In contrast, 51% of survey respondents who applied for their loan via a bank’s proprietary channels chose to renegotiate their rates, illustrating a 16% difference to those who applied via a broker.

HOW SATISFIED WERE YOU WITH THE OVERALL LOAN APPLICATION PROCESS? Borrowers who obtained their home loan within the last 2 years - By application channel Dissatisfied (0-2)

Neutral (3-7)

Highly satisfied (8-10)

100% 80% 58%

60%

69%

While borrowers who applied through a broker appear savvier when it comes to renegotiating their interest rates, the report found these borrowers to be less satisfied with customer experience than borrowers who applied through different channels. RFi Group data supports this finding, with data from March 2017 showing that borrowers who applied for their loan via a broker are significantly less likely to be satisfied with the overall loan application process compared to those who applied directly through a branch.

While borrowers who applied through a broker appear savvier when it comes to renegotiating their interest rates, the report found these borrowers to be less satisfied.

40% 20%

39%

0%

3%

3%

Broker

Direct

28%

Source: RFi Group Australian Mortgage Council Mar-17

Co-author of the report, Geoff Rush, said that borrowers may rate brokers lower in terms of customer experience because they have higher expectations from this channel. Rush explained, “That is, they believe that the process should be easier as the broker will do all the ‘heavy lifting’ on behalf of the customer throughout the end-to-end process.”

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MORTGAGES

Mortgage insurer concerned about credit growth The tightening of lending standards by the Australian banks following the Australian Prudential Regulation Authority (APRA), recent decision to impose more strict regulations has given rise to a new disturbing trend. More Australians are withdrawing money on their credit cards in order to have enough money for a house deposit. Genworth Mortgage Insurance has raised to concerns about this trend, as it is a risky approach to enter the Sydney housing market. Georgette Nicholas, the Chief Financial Officer of Genworth, expressed her concern. “We haven’t really seen credit growth come down — more ­people are using unsecured debt for crosscollateralisation to access the housing market. We’re concerned about the pressure that puts on the system in a stressed environment,” Nicholas explained. The concern expressed by Genworth may be warranted as ANZ, this week, announced that it saw an increase in the proportion of customers who are defaulting on loan repayments.

Budget unveils salary sacrificing scheme for first-home buyers In an effort to boost access to the housing market, the 2017 Federal Budget has included a new first homebuyer superannuation scheme. Starting from July 1, first home buyers will be able to save for a home deposit by salary sacrificing into their super fund. As part of the “First Home Super Savers Scheme”, individuals will be able to use $30,000 of voluntary superannuation contributions for the explicit purpose of placing a deposit on a house or apartment. Couples will be able to team up and contribute $60,000 in total. Contributions and earnings will be taxed at 15%, while withdrawals will be taxed at 30% below their marginal rate. All contributions and associated earnings will be able to be accessed from July 1, 2018 onwards. “Contributions will be limited to $30,000 per person in total and $15,000 per year. Under this plan, most first home savers will be able to accelerate their savings by at least 30%,” Treasurer, Scott Morrison, explained in his budget speech. “Savers will not have to set up another account, they can just use their existing super account and decide how much of their income they want to put aside to save for their first home deposit.”

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CARDS

Cards Major banks restructure credit card rates on AMEX cards WORDS REGGIE ALDERSON & HUW GRIFFITHS

I

n response to the upcoming regulatory changes, which come into effect in July, both CBA and NAB have announced changes to their credit card offerings. The regulatory changes by the Reserve Bank of Australia are set to introduce a standard rate on interchange fees, reducing the resources banks have for credit card rewards programs.

Unlike ANZ, who announced two months ago that it would be scrapping AMEX cards completely, CBA and NAB will retain AMEX companion cards however both banks are making cuts to the earn rate.

Unlike ANZ, who announced two months ago that it would be scrapping AMEX cards completely, CBA and NAB will retain AMEX companion cards however both banks are making cuts to the earn rate. CBA AMEX companion cardholders will still receive the same level of points per $1 spent on overseas purchases and select retailers (supermarkets, department stores and service stations). While cardholders will no longer receive the same higher earn rate on AMEX purchases made everywhere else. Meanwhile NAB AMEX companion cardholders will receive smaller reductions to the earn rate however these changes will apply to all purchases. CBA is offering a small compensation to their Platinum and Diamond Award companion cardholders by dropping foreign exchange fees of up to 3.50%.

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CARDS

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CARDS

New Qantas branched credit card coming to the market WORDS REGGIE ALDERSON Qantas announced plans to offer its own platinum credit card to Australian consumers. The new offering from Qantas, which is expected to be available by the end of June, is aimed at targeting affluent travellers and it is rumoured the card will deliver a high frequent flyer points earn rate with exclusive Qantas travel benefits for users. “This is a premium card aimed at people who love earning Qantas Points and who travel enough to want access to special deals on air fares and lounge access,” CEO of Qantas Loyalty, Lesley Grant, said. “Ultimately, it’s about giving customers more choice by widening the range of cards that you can earn points on and adding some unique features that only Qantas can offer,” added Ms Grant. With more than 2 out of 3 credit cardholders are already participating in the Qantas Frequent Flyer Program, RFi Group data suggests a Qantas-branded credit card has a large market to target. The new product, powered by Mastercard and issued by Citi, will be the first Qantas-branded credit card ever seen on the market.

WHICH OF THE FOLLOWING REWARD/ FREQUENT FLYER PROGRAMS ARE YOU A MEMBER OF?

100% 80%

75%

72%

68%

66%

60% 40%

33%

20% 8%

0% FlyBuys

Velocity rewards

Qantas Woolworths Myer One Frequent Everyday Flyer Rewards program

I am not a member of these rewards programs

Source: RFi Group Australian Cards Council Mar-17

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CARDS

Upcoming ING credit card stands out with high minimum repayment WORDS REGGIE ALDERSON ING Direct’s first credit card, set to be released late this year, will require consumers to make minimum repayments of 10% each month. This minimum repayment threshold is roughly five times higher than the required repayment rates found on most other credit cards in the market.

This minimum repayment threshold is roughly five times higher than the required repayment rates found on most other credit cards in the market. According to RateCity money editor Sally Tindall, forcing repayments of at least 10% of the card balance each month is likely to help cardholders control their debt. “We know the average Australian is up to their eyeballs in credit card debt, carrying almost $4267 on their personal credit card each month. A lot of credit card providers let their customers pay off the bare minimum, instead filling their profit margins with the interest,” Tindall said.

ING Direct’s decision to have a higher than average minimum repayment amount may be a blessing in disguise as RFi Group data shows that there has been a slight increase in the proportion of credit cardholders who do not pay their credit card balance off in full each month. ING Direct’s decision to have a higher than average minimum repayment amount may be a blessing in disguise as RFi Group data shows that there has been a slight increase in the proportion of credit cardholders who do not pay their credit card balance off in full each month. By lifting the minimum repayments ING will be able to encourage better debt control among its customers.

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PERSONAL LOANS

Personal Loans

Borrowers moving to personal loans and away from credit cards WORDS REGGIE ALDERSON & DEREK HO

T

he latest quarterly consumer credit report, released by Equifax, shows Australians prefer to take out personal loans opposed to credit cards as a method of paying for larger purchases. According to the report, the 4.6% increase in consumer credit applications from March 2016 to March 2017 and can largely be attributed to an increase in personal loan applications. Personal loan applications grew by 13% year-on-year, with South Australia and Tasmania seeing the biggest increases, 14.3% and 14.1% respectively. Although personal loan applications increased, credit card applications fell by 3.8% across Australia, with Western Australia and Victoria falling the most.

Although personal loan applications increased, credit card applications fell by 3.8% across Australia, with Western Australia and Victoria falling the most. â&#x20AC;&#x153;While credit cards are being used more for everyday transactions, it is likely that consumers are funding a greater number of higher value household purchases through personal loans,â&#x20AC;? said Senior GM of Consumer Products at Equifax, Angus Luffman. Luffman also believes the growth in personal loan applications is driven by the emergence and availability of non-conventional loans and alternative lenders such as those that offer peer-to-peer (P2P) loans. Although Australians are becoming more comfortable with challenger lenders and applying for applications online, March 2017 RFi Group data suggests traditional lenders remained the most preferable as more than 1 in 3 personal loan holders applying for their most recent loan through a bank branch.

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PERSONAL LOANS

ASIC to restrict ‘unfair’ auto-finance commissions WORDS REGGIE ALDERSON Flex commissions are commissions which car dealers earn through the profit made on interest rates car loan holders pay on their auto finance loan. Although flex commissions cost borrowers thousands of dollars in extra loan repayments few borrowers are aware of them. The lack of awareness around this commission is unsurprising as RFi Group data shows that more than 1 in 4 car loan holders don’t even know the interest rate which they pay on their loan and more than 30% of car loan holders believe they pay an interest rate of less than 7%. In a bid to help consumers, ASIC is looking to introduce legislation that will stop car dealers receiving this type of commission. Peter Kell, Deputy Chairman of ASIC explained the decision as, “We are confident this prohibition will benefit consumers by removing incentives that increase the interest rates they are charged. We consider that average interest rates on car loans will fall as a result of more efficient pricing models and lower losses through defaults. We expect lenders will work with car dealers in moving to fairer and more sustainable models.”

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WHAT INTEREST RATE ARE YOU PAYING ON YOUR LOAN? Car loan holders

35% 30% 27%

25% 21%

20%

19% 17% 15%

15% 10% 5% 0% Less than 5%

Between 5 and 6.99%

Between 7 and 9.99%

More than 10%

Source: RFi Group Australian Consumer Lending Council, Mar-17

I am not sure


PERSONAL LOANS

Alternative lenders to benefit from Budget WORDS CHARLOTTE NEWELL Alternative lenders could see a surge in personal loan applications following the announcement of a 0.06% annual levy, which will be applied to funding sources, during the 2017 Budget. The levy is only set to effect major players in the Australia, namely the big four banks and Macquarie, which provides an opportunity for more alternative and fintech lenders to enter and diversify the competition in the lending market. The government also announced it will introduce an open banking system, an initiative also supported by fintechs. RFi Group data shows the proportion of borrowers who are highly comfortable with the idea of borrowing from a peer-topeer lender has been steadily increasing since June 2016 and now sits at 12%.

The levy is only set to effect major players in the Australia, namely the big four banks and Macquarie, which provides an opportunity for more alternative and fintech lenders to enter and diversify the competition in the lending market. While borrowers may still take some time to warm to the idea of borrowing from a peer-to-peer lender the announcement of the levy is still welcome news. Daniel Foggo, the CEO of peer-to-peer lender RateSetter, embraced the government’s decision saying, “this measure will help break down the huge advantage big banks have over innovative new entrants and make it significantly easier and faster for consumers and small businesses to switch to providers like RateSetter who can offer a much better deal.” If this levy is passed through Parliament, it is set to become effective as of July 1.

Daniel Foggo embraced the government’s decision saying, “this measure will help break down the huge advantage big banks have over innovative new entrants.”

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PAYMENTS & DIGITAL

Payments & Digital

HSBC launch Apple Pay WORDS REGGIE ALDERSON

H

SBC credit cardholders will be able to make contactless payments without needing to use their physical credit card after the global bank announced it has linked all its credit cards with Apple Pay. Australia is the sixth global market HSBC has launched Apply Pay and they follow several other institutions, such as ANZ, American Express (AMEX) and more than 20 mutual banks, which already offer Apple’s mobile payment technology in the country. Graham Heunis, Head of Retail Banking and Wealth Management at HSBC Australia, said he was excited about

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customers using the technology. “The majority of our customers’ credit card payments are contactless and our experience in other markets shows us we can expect an increase in contactless payments as customers rapidly adopt Apple Pay,” he said. Heunis also said the bank plans to link Apple Pay with its debit cards in the coming weeks. According to RFi Group data, 46% of Australian credit cardholders are aware of Apple Pay, ranking it as the mobile payment service cardholders are most aware of. While awareness of Apple Pay is high, currently 7% of credit cardholders have used Apple Pay. Although this proportion is low it has been steadily increasing since March 2016.


PAYMENTS & DIGITAL

Australia is the sixth global market HSBC has launched Apply Pay and they follow several other institutions, such as ANZ, American Express and more than 20 mutual banks, which already offer Appleâ&#x20AC;&#x2122;s mobile payment technology.

USAGE OF MOBILE PAYMENTS AS A PROPORTION OF THE ENTIRE MARKET Apple Pay 8%

7%

6% 4%

4% 2%

3%

3%

Jul-16

Sep-16

1%

0% Mar-16

Dec-16

Mar-17

46% of Australian credit cardholders are aware of Apple Pay. While awareness of Apple Pay is high, currently 7% of credit cardholders have used Apple Pay. Although this proportion is low it has been steadily increasing since March 2016.

Source: RFi Group Australian Credit Cards Council, Mar-17

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PAYMENTS & DIGITAL

Despite a large number of Australian banks introducing mobile payment options, a recent survey, run by online comparison website finder.com.au, revealed that 72% of people have never used their smartphone to make a payment.

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PAYMENTS & DIGITAL

Mobile payment technology yet to gain widespread adoption WORDS REGGIE ALDERSON Despite a large number of Australian banks introducing mobile payment options, such as Apple Pay, Android Pay and Samsung pay, a recent survey, run by online comparison website finder.com.au, revealed that 72% of people have never used their smartphone to make a payment. Of the 2,000 consumers surveyed, only 7% had spent more than $100 on a mobile phone transaction. Finder.com.au spokeswoman, Bessie Hassan, attributed the lack of smartphone payment adoption to the contentment consumers feel

with their current payment methods, including contactless card payments. “It’s a solution to a problem that doesn’t exist,” Ms Hassan said. “Current payment systems are very entrenched … The widespread popularity of contactless ‘tap and go’ payments means Aussies aren’t rushing to change their buyer behaviour.” Of those survey respondents who did not use a smartphone to make a payment, 43% were content with using cards or cash and an additional 29% could either not see the benefit or lacked trust in the security of mobile payment technology.

Faster adoption of payment technology by millennials in New Zealand WORDS DEREK HO Visa recently released a report about New Zealand Millennials (those born from 1980 to 2000) and their spending habits. Visa’s report found that a large proportion, up to 62%, would use technology such as fingerprint or retina scanners to make payments. Visa New Zealand Country Manager, Marty Kerr, says that most millennials would never leave home without a mobile phone, and physical cards and wallets were no longer necessary. Kerr says that the younger generation have become used to fingerprint scanners due to Apple’s iPhone fingerprint locks and have adopted newer technologies, such as contactless mobile payments, faster than any other group. While there is still some hesitation about using payments technology among other age groups banks in

New Zealand have come up with several ways to make consumers feel more comfortable. For those that have security concerns about using contactless payments, ASB Bank has created a unique feature allowing cardholders to turn off contactless transactions in the ASB mobile banking app. Kerr says that this feature can provide greater control over security for customers, and this will be eventually adopted by other banks. While making consumers feel more secure is good, RFi Group data from April 2017 suggests New Zealanders would be most encouraged to use mobile wallets if they can store and scan loyalty cards (21%), store electronic receipts made with the mobile wallet (17%) or store digital copy of ID cards (12%).

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Australian Retail Banker - June 2017 Edition  

An RFi Group publication

Australian Retail Banker - June 2017 Edition  

An RFi Group publication