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MARCH 2018 ISSUE

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

Melanie Evans Head of Retail Bank at ING Australia WOMEN IN LEADERSHIP 10

RFi GROUP OPINION

MORTGAGES

PERSONAL LOANS

06 Understanding the ‘why’ behind scorecard metrics

30 Home lending restrictions may be relaxed if property prices fall

38

Fixed interest rate borrowers on the decline


CONTENTS MARCH 2018

06

08

RFi GROUP OPINION

RFi GROUP INSIGHT

Understanding the ‘why’ behind scorecard metrics

What makes a good mobile banking app?

18

23

RFi GROUP INTERVIEW

TRANSACTIONS

Tim Reed Rohit Lakhotia

CUA launches Apple Pay on its eftpos rediCARD

34

38

CARDS

PERSONAL LOANS

NAB stops applications for Virgin Australia Velocity Frequent Flyer reward credit cards

Fixed interest rate borrowers on the decline


10 WOMEN IN LEADERSHIP Melanie Evans

14 SPECIAL FEATURE Australian Mortgage Innovation Summit

26

30

SAVINGS

MORTGAGES

CBA banking app set to save Aussies from ‘damage’ overspending

42 PAYMENTS & DIGITAL Commonwealth Bank of Australia introduces AI chatbot “Ceba” to assist customers with their banking tasks

Home lending restrictions may be relaxed if property prices fall

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SAVE THE DATE!

FINSIA AUSTRALIAN YOUNG FINANCE PROFESSIONALS OF THE YEAR AWARDS 2018 THU 22 MARCH 2018

LOCATION Beta Bar Sydney 238 Castlereagh Street Sydney, NSW 2000

RFi Group and AB+F in partnership with FINSIA are proud to announce the finalists for the 2017 Young Finance Professional Awards.

Candidates will be judged based on their contribution to their organisation and the industry in a number of areas.

In its 4th year, these Awards were designed to recognise and celebrate the finance industries brightest professionals and are open to professionals aged 35 and under.

For tickets, sponsorship and exhibition enquiries: James Harradine 02 9126 2616 jharradine@rfigroup.com


Welcome to the March 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 Alan Shields’ Opinion Piece which includes insight from RFi Group’s 2-year-old, customer experience tracking service, 'XPRT', while our Insight Piece - by RFi Group’s Kate Wilson, takes a look at the very important (!) topic of ‘What makes a good mobile banking app?’ This month’s Women in Leadership piece is a great interview with ING Direct’s Head of Retail Banking Melanie Evans following her participation as a speaker at our recent annual Australian Mortgage Innovation Summit.

Our product news looks at Visa and Mastercard moving credit card security towards biometrics, CBA’s banking app setting to save Aussie’s from ‘damage’ overspending, an expected lending restriction relax if property prices do fall, Afterpay’s popularity continuing to rise as credit card debt falls, Harmoney’s adoption of AI to assist with personal loan applications and Bankwest’s new payment ring, the “Halo”. I hope you enjoy this edition and as always, wish you a great month,

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


RFi GROUP OPINION

UNDERSTANDING THE ‘WHY’ BEHIND SCORECARD METRICS WORDS ALAN SHIELDS

M

arch 2018 marks 24 months since RFi launched its customer experience tracking service 'XPRT' in consultation with some of the biggest banks in Australia. XPRT or eXPerience Research Tracker surveys almost 50,000 Australians each year and brings together key scorecard measures such as market share, share of wallet, satisfaction/ advocacy and product uptake with channel and productspecific metrics in a way that has not been seen before. Banking sentiment is a moveable feast at the moment and so it’s important that organisations are able to track strategic scorecard metrics such as NPS and satisfaction as they move. Even more importantly, it’s important that these organisations understand the levers that have moved or will move their

metrics in a positive or negative way. As a consequence, we are increasingly asked to explain what contribution various aspects of a bank’s proposition make on these scorecard metrics. That’s where ‘bucket analysis’ comes in;a process whereby we look at all the buckets that we can tip into a proposition and see which are the largest. The five buckets we tend to look at are Product, Relationship, Service, Operations/ channel and Brand. Of course the ‘size’ of each bucket differs by bank, but what’s important is how the ban performs in each are relative to the market and to itself over time. The figure below shows a fictional ‘Bank X’ (BNKX) and its bucket profile. Based on this, Bank X’s senior execs know which ‘buckets’ they need to focus on and what aspects have the largest impact on those.

Performance of bucket (BNKX)

7.00

Performance of bucket (BNKX)

6.37

Performance of bucket (BNKX)

7.00

Performance of bucket (BNKX)

7.32

Performance of bucket (BNKX)

6.75

Performance of bucket (Market)

7.03

Performance of bucket (Market)

6.51

Performance of 7.14 bucket (Market)

Performance of bucket (Market)

7.40

Performance of bucket (Market)

6.85

BNKX vs Market -0.14

BNKX vs Market -0.15

BNKX vs Market -0.07

BNKX vs Market -0.04

BNKX vs Market -0.10

1

Has product and service information that is easy to find

Understands my needs

Handles my queries in a competent and fair manner

Has conveniently located branches

Is a brand for me

Provides all relevant information about its products in a clear and simple manner

Is pro active

Provides reliable/ consistent customer service

Enables me to conduct the transaction I want through my preferred channel

Is fair

2

Provides solutions that meet my needs

Recognize and rewards me based on my overall relationship with the bank

Is honest, trustworthy and fair with its customers

Has conveniently located ATMs

Is innovative

3

20% Product

19%

21%

14%

Relationship

Service

Operations/ channel

Base: XPRT respondents (Jan-18: Total: n=24.080). Based on a 6-month average

Source: RFi XPRT (6-month rolling average)

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26% Brand


RFi GROUP OPINION

OVERALL NPS FOR MOBILE BANKING Impact (Relationship of atribute to mobile banking NPS)

31%

21%

16%

FUM across all products held with BNKX

NUMBER OF TRANSACTIONS PER CHANNEL PER SEGMENT Top 3 channels by BNKX MFI customers

Segment 1

>$100.000

18.6 NTPM* Segment 4

$5.000 $100.000

18.7 NTPM* Segment 7

<$5.000

16.1 NTPM*

Segment 2

17.4 NTPM* Segment 5

19.1 NTPM* Segment 8

18.9 NTPM*

Segment 3

20.7 NTPM* Segment 6

24.5 NTPM* Segment 9

18.6 NTPM*

*Average number of transactions per month

1-2

3

4+

XPRT allows Bank X to understand where to invest further when it comes to moving the

12%

Predictor

General look and feel

Range of tasks

Most important

Of course, in 2018 this innovation is becoming increasingly important and banks have an absolute focus on how digital experience and associated drivers are impacting on overall customer metrics. XPRT is able to show Bank X which customer segments are using internet vs mobile banking (and indeed their other channels), what the contribution of those is to the overall experience within that channel and lastly, which aspects of the experience are going well or not â&#x20AC;&#x201C; basically like a diagnostic tool.

XPRT allows Bank X to understand where to invest further when it comes to moving the NPS dial and looks at a range of factors that move the dial on digital experience, such as look and feel, security and range of tasks. It then tracks these over time (as shown below).

Security

Response time

10%

Ease of use

10%

Reliability

Least important

In the case of Bank X, brand is the largest contributor to its scorecard metrics and within that bucket, it is most important that the bank: - Is a brand for me - Is fair - Is innovative It could be that Brand X has strong community ties, which need to be upheld to make it resonate with its customer base. Equally, it must be seen to be doing the right thing when it comes to customers and lastly, it must be innovating within the frame of reference of its customer base.

Note: Regression analysis conducted using 6 months of rolling data

Source: RFi XPRT (6-month rolling average)

Of course, the devil is in the detail when it comes to all these metrics. XPRT captures the right data to understand this and shows that the following also make a huge difference: - Whether customers are using a bankâ&#x20AC;&#x2122;s app or mobileoptimized browser - The frequency with which customers are logging in each month - The version of the app that they have downloaded - Which secondary mobile banking apps they have access to and their experiences there - The knock-on effect of mobile payments innovation and developments.

NPS dial and looks at a range of factors that move the dial on digital experience, such as look and feel, security and range of tasks.

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RFi GROUP INSIGHT

WHAT MAKES A GOOD MOBILE BANKING APP? WORDS KATE WILSON

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RFi GROUP INSIGHT

W

should reflect that. Financial institutions should look to create a simple layout that is easy to navigate. This is one of the primary barriers we see among mobile banking app detractors survey by RFi Group.

According to RFi Group data, simplicity and ease of use are key to creating a good mobile banking app experience. In particular, it is important to create a good customer experience when performing relatively simple and straight forward tasks such as checking account balances and recent transactions and transferring money between accounts. These are the tasks Australians are most likely to perform via a mobile banking app and getting the customer experience right is crucial to encouraging customers to perform a greater range of tasks via mobile banking. These are also the task consumers are most likely to consider essential elements of their mobile banking app. RFi Group data suggests that what customers want here is to be able to perform these tasks easily and intuitively without having to struggle with menus and multiple clicks. These tasks are generally simple and straightforward in the eyes of the consumer and the experience of performing these tasks

Getting the basics right is key to driving mobile banking app advocacy and usage. Doing so also opens the door to further innovation and the opportunity to differentiate a mobile banking app by adding new features. Consumers who are satisfied performing basic tasks via a mobile banking app are more likely to be open to shifting a wider range of tasks to their mobile banking app. These consumers are also likely to be the early adopters of new features added to the app. Features such as 4-digit PIN login, transferring money domestically and internationally have become hygiene factors consumers expect from their mobile banking tasks. Meanwhile, features such as notifying the bank of overseas travel, fingerprint login and the ability to lock a card are also valued by consumers, especially as more financial institutions begin to offer them. RFi Group data also points to a number of features not currently offered by a wide range of institutions but in which consumers already see some value and would like added to their mobile banking apps. This includes being able to store receipts and loyalty cards within the app and the ability to pay bills via photo or screenshot. Adding these sorts of features to a mobile banking app could help to differentiate from competitors and lead to higher rates of customer advocacy as well as increasing usage.

ith the majority of Australians now performing digital banking tasks at least weekly, providing a good digital banking service - and increasingly a great mobile banking app - is no longer a nice to have for customer acquisition and retention. RFi Group research tells us that the more digitally engaged a consumer is with their main bank, and the more frequently they use a mobile banking app to interact with their main bank, the more likely they are to be promoters and the more products they hold. Therefore, encouraging customers to use mobile banking as close to daily as possible is key. But what makes a good mobile banking app?

% OF AUSTRALIANS WHO PERFORM BANKING TASK AT LEAST WEEKLY VIA: 70%

63%

60%

56%

50%

45%

40% 30% 20%

20% 10%

4%

0% Mobile banking app

Internet banking Banking via mobile via computer web browser

Banking via the phone

Visiting a branch

Source: RFi Group

The $64,000 question is, what impact will devaluations have? and loyalty cards within the app and ...37% say they will cancel their the ability to pay bills via photo or cards and find alternatives. screenshot. Issuers be warned! This includes being able to store receipts

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RFi GROUP WOMEN IN LEADERSHIP

Melanie Evans Head Of Retail Bank at ING Australia WORDS CHLOE JAMES 10 ARB - RFi MEDIA

Everyone I’ve worked with has influenced me in some way. We are pretty lucky to work in an industry with brilliant minds, and one that is so connected with other parts of society and the economy that we get to spend time with many brilliant ‘non bankers’ too.


RFi GROUP WOMEN IN LEADERSHIP

J

ust last week, Melanie Evans the Head of Retail Banking for ING Australia, spoke to a full house at RFi Group’s Australian Mortgage Innovation Summit. Following the event, we had a chance to sit down with Melanie to discuss her career and advice she would pass on to others in the industry – this is what she said… How did you get where you are today and what, or who, has been your greatest influence in business? I grew up in a house that encouraged aspiration and hard work. I’d had a casual job since I was 12, so I knew the benefits of financial independence heading into my university phase. With this in mind, pursuing a cadetship that allowed me to work and study at undergraduate level was a natural decision for me to make. And so I started work at St. George Bank as a cadet at 17 years old. I worked as a teller at Bankstown Square branch for my first six months. I studied part time while experiencing the benefit of rotating around the bank. I worked out pretty quickly that I found business interesting. I loved the people I worked with and I found finance, marketing, technology and tax and accounting areas that I enjoyed studying. In rotating through a large part of the bank as part of my cadetship, I got to understand the important role that financial services plays in the economy and in people’s everyday lives. That’s the reason I’m still in the industry many (many) years later. Everyone I’ve worked with has influenced me in some way. We are pretty lucky to work in an industry with brilliant minds, and one that is so connected with other parts of society and the economy that we get to spend time with many brilliant ‘non bankers’ too. I’ve learnt the most during significant events like dot com bubbles, the GFC, mergers, new technologies, significant industry reform or structural change of the economy. The reason why those events stand out is the impact they have on people – customers and employees. You can’t help but want to make a difference.

What is the driving force behind your career goals/ aspirations?

secondly what the response was likely to be.

I’ve always been driven and motivated by purpose above all else. I believe that banking and wealth management firms do make a significant difference to the communities in which they operate and therefore the individuals within those communities.

Usually I am very confident about being transparent on the importance of my personal life, so the fact this worried me was concerning in itself. This concern was completely misguided and in hindsight could have impacted my likelihood of being successful.

The roles I’ve taken on have always been about the opportunity to make a difference to customers, the team and the business. I find this is incredibly motivating and never leaves me wanting for something else.

Uday Sareen (CEO, ING Australia) and others involved - globally and locally were not only accepting of the situation, but incredibly supportive. Not just during selection, but also during my onboarding, subsequent parental leave and flexible return to full time work.

The roles I’ve taken on have always been about the opportunity to make a difference to customers, the team and the business. I find this is incredibly motivating and never leaves me wanting for something else.

The environment in which I work is also an important force. I’ve had the benefit of working with some phenomenal leaders over the last couple of decades. I’ve learnt a lot because those that I worked with have been so generous with their experiences, perspective and knowledge. Have you ever made a business decision you’ve regretted, and can you share it? And, what is your greatest professional achievement to date?

I’ve reflected on this quite a lot and now I’m very open in sharing my story with both young women, and leaders of both genders. I learnt a lot about myself and how I assumed the world worked. I couldn’t have been more wrong.

I’ve reflected on this quite a lot and now I’m very open in sharing my story with both young women, and leaders of both genders.

My greatest achievement is the collection of experiences, achievements and learnings of the last 22 years. Many memorable moments, and I wouldn’t do them any justice by calling one or even a few out.

One recent lesson learnt comes to mind. I found out I was expecting my son during the search and selection process for my current role – the Head of Retail Bank at ING. I concluded that the moment I shared this, my chances of being offered the role would diminish immediately. My concern took on two forms; when was the “right” time to share the news and

ARB - RFi MEDIA 11


RFi GROUP WOMEN IN LEADERSHIP

What do you do to keep evolving your career, to ensure a fulfilling and successful longevity? I’ll return to the point I’ve made about purpose here. I think that’s the bedrock of longevity in any career. It’s not hard to stay engaged and fulfilled when you believe that what you do has impact and purpose. In large financial services firms, those steering the talent pool of the organisation will influence what opportunities are available to you. I’ve been lucky to be led by those sponsoring my potential, my career path and future opportunities in the organisation. Learning, development and fulfilment will be difficult to come by without new opportunities that stretch you. Without leaders wanting to expose you to these, it’s difficult to progress.

I’ve been lucky to be led by those sponsoring my potential, my career path and future opportunities in the organisation.

I’ve had the opportunity to chase experiences, get to know different customer segments, take on different leadership challenges, start up business units and lead mature businesses. Judgement and decision making becomes ever so important as your career matures. I am lucky enough to have had exposure to all of these moments, and humble enough to know there is plenty more to learn. I’ve also had a lot of fun. A simple concept, but I’ve really enjoyed myself. I’ve worked with people that have become friends I will have for a lifetime, had the opportunity to meet some truly amazing people and had experiences that I know I wouldn’t have had in any other industry.

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How do you achieve a balanced life and what activities do you participate in outside of your working life, that you see contributing to your business success? Every successful business leader that I’ve looked up to has also had a rewarding life beyond their profession. I am ruthless in working out my time across work, family, friends and myself. No week is ever perfect and I am ok with that, but I do reflect on how I’ve spent my time and the impact of how that makes me feel.

No week is ever perfect and I am ok with that, but I do reflect on how I’ve spent my time and the impact of how that makes me feel.

My husband and I have two young children, so we’re constantly left wanting for more time to spend with them. My family is my priority and I am unapologetic about that. I have been lucky in that I’ve not worked with very many people that don’t share this as a value. We are both actively involved in our community. The importance of giving our time and energy to other causes is something we share and support each other on. I am an independent Director of Surf Lifesaving Australia. Not only do I feel strongly about the movement’s purpose, but surf and sport played an important part of my life growing up, so I want to do my bit to ensure future generations have strong community and sporting movements that can influence their lives. It’s pretty easy to find rewarding ways to spend ‘spare’ time. I have a great group of friends from all walks of life with very different backgrounds and perspectives. I don’t

just spend my time with friends who have jobs like mine, live a life like mine or have the same views as mine.

I don’t just spend my time with friends who have jobs like mine, live a life like mine or have the same views as mine.

So how does this contribute to business success? I’m a leader of people working for a bank that has a purpose of empowering people to get a step ahead. My life outside of work helps me on both of those fronts. The more people I can meet and get an understanding of their challenges and goals, the better customer advocate and people leader I can be.

The more people I can meet and get an understanding of their challenges and goals, the better customer advocate and people leader I can be.

Do you mentor others? What have you learnt in the process? Absolutely. Giving back and supporting others is critical. Feeling like I can make a difference and seeing someone that I’ve mentored grow and progress is in itself a source of achievement for me too. There is nothing better than seeing someone important to you succeed in life and business. There is so much focus on the individual at times, that we forget we are


RFi GROUP WOMEN IN LEADERSHIP

all part of one big system. I find mentoring can be valuable for both the mentee and mentor. I often come out of sessions and realise that I can apply the knowledge or perspective that has been born from a mentoring discussion – the point of view a mentee brings to a situation expands my perspective on customer, business, and team or industry challenges. 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? The same advice I would share with a young male: · Love what you do and know why it gives you purpose and energy. · Seek out good leaders that want to

be generous with their knowledge and perspective and that believe you’re capable of more than you think you are. · Lead. · Work hard and be confident that you can get there on merit. · Be interested in and curious about the broader world. · Remember why you are in the room and play to these strengths. · Help others in whatever form ‘help’ comes in. · Take time out to recharge your batteries.

leader, you must give it the investment it deserves. Future generations of leaders will face a different set of marketplace and workplace settings than those before them – those that succeed will find the opportunity amongst these.

In terms of gender, there are specific challenges that come with conscious and unconscious bias. There is always inertia, so women and men must do their bit to change what’s expected and what’s possible. Understanding these challenges and how to change the environment takes time and energy. As a

Melanie Evans Head of Retail Bank at ING Australia

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SPECIAL FEATURE

AUSTRALIAN MORTGAGE INNOVATION SUMMIT

CHARTING THE HOME BUYING JOURNEY RFI GROUP’S EIGHT ANNUAL AUSTRALIAN MORTGAGE INNOVATIONS SUMMIT BROUGHT TOGETHER BANKS, DISRUPTORS AND THOUGH LEADERS TO EXPLORE THE BIG THEMES IMPACTING MORTGAGES AND HOW BANKS AND FINANCIAL INSTITUTIONS CAN SEIZE OPPORTUNITIES BY UNDERSTANDING THE CUSTOMER HOME BUYING JOURNEY. CHRISTINE ST ANNE REPORTED ON THE DAY.

Getting the pricing right for FHBs

B

anks need to understand the different behaviour types of first home buyers (FHBs) in order to offer them the right incentives that will make this segment long term customers. According to Nomis Solutions managing director Damian Young FHBs fall into three main buckets, from highly price sensitive, to low sensitive FHBs to those in the middle of the price sensitivity cure. Young offered an insight into the different incentives banks can offer. Those FBHs who are highly price sensitive tend to be attracted to promotional. “This is good strategy to get customers on board,” he said. For those in the middle of the price sensitivity curve, incentives such as cash backs are effective while those who are not influenced by price are a relatively small bucket and just want a loan to get on the property ladder. For REA Group executive manager of financial services Eloise Wall, there are two types of FBHs – those who are worried they won’t get a loan and those who want the maximum loan. “A lot of people are embarrassed about talking to a bank about a mortgage. They don’t want to seem uninformed. We are spending a lot of time helping FHBs take the next step,” Wall said. These include creating sandboxes to test ideas and ‘livability tools’ that help these buyers understand whether they can afford their financial commitments. Pricing for relationships Young also identified the importance of customer relationship pricing in the home loan buying journey, a concept he is working with Canadian banks on. “Given that buying a house is the single most important decision for many people, you are really selling a relationship not a product,” Young said. This relationship pricing is based on the cross-selling opportunities for banks in

14 ARB - RFi MEDIA

Given that buying a house is the single most important decision for many people, you are really selling a relationship not a product.

the purchase of a mortgage. This pricing allows for discounts to be made across a plethora of products relevant to the FBH including insurance, cards, and personal loans for renovations. “You are essentially looking to FHBs to become your life partners. Relationship-based pricing reflects what banks can do to meet the individual needs and preferences of their customers.”


SPECIAL FEATURE

Outside pricing, the panel also looked at what other incentives FHBs can access in order to get a step on the ladder. Lend Lease managing director of communities, Matthew Wallace said the business is about to launch a discount on the deposit (5 per cent compared with 10 per cent) required for its apartments to FBHs. It’s a more solid offering than an initiative previously canvassed by the business – a Tinder-style app that was to match FBHs to investors. “It didn’t get much traction past the lunchroom, but we do spend a lot f time looking at ways to help improve housing affordability,” he said.

It didn’t get much traction past the lunchroom, but we do spend a lot f time looking at ways to help improve housing affordability.

get is what they wanted,” Ryan said. He provided an example of a consumer who used his platform. He used the platform at any time of the day – at 9am or 10pm. Speaking with the platform’s experts he received around 20 detailed answers. And while he transacted digitally, he was also talking to people with accountable advice. Ultimately this information allowed him to buy his first home in Hornsby. For REA’s Wall, a digital mortgage will happen sooner than later particularly on the back of open banking. However, the process behind it will need to be interactive. “Personalised responses will be needed particularly around real time data sharing. It needs to be a compelling proposition,” she said. Nomis’ Young would like the digital proposition to include a one-stop shop that can provide home buyers with access to legal and conveyancing advice. “This is something that banks can facilitate. More banks are looking to achieve this by setting up panels. In terms of digital mortgages, we are not quite there yet but it’s not going to be too far away.”

The trust factor The panel noted that there was not much room available for government incentives given that FBHs are already a priority, however, they acknowledged that negative gearing will be scaled back if Labor is to win the next election. The digital mortgage was another obvious theme on the panel particularly as RFi Group research reveals, the FHB cohort are quite open to transacting digitally. Digital platforms also give FHBs access to information that empowers them to make the right decision. For simplyaskit founder Paul Ryan, information on platforms need to be accountable – a focus for his business. It allows his customers to have trust in the information they receive. “FHBs want to work with people they can trust. They want know that the loan they

49 per cent of millennials want to own their own home

84 per cent of millennials and 62 per cent of 55 – 64 per cent of baby boomers use a digital channel at least once a week

This is something that banks can facilitate. More banks are looking to achieve this by setting up panels. In terms of digital mortgages, we are not quite there yet but it’s not going to be too far away.

39 per cent of consumers are very comfortable using digital only payment providers, but only 25 per cent are very comfortable using digital only for borrowing.

39 per cent of consumers are highly likely to submit a mortgage application entirely via an online channel

Source: RFi Group

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SPECIAL FEATURE

"This is me": Meeting the needs of refinancers Credit Union Australia (CUA), Australia’s largest credit union, has expanded its digital wallet services offering. Having already launched Android Pay with eftpos late last year, bringing Apple Pay to CUA’s eftpos rediCARD holders allows them to utilise their iPhones and Apple watches to make efficient and secure eftpos payments. The refinancing, upgrading journey is a personal one for ING Australia head of retail banking Melanie Evans. Speaking on the panel, Evans thought that she had bought her “forever home” but with a young family, she is now looking to upgrade. “This is me. From a professional and personal perspective, refinancers are similar to FBH. We are in the same boat. Refinancing, just like getting a new mortgage can be just as painful,” she said. However, refinancers are not necessarily just made up of growing families. Australia’s ageing population underpin part of the demographics behind refinancers with families looking to add granny flats to house their parents. Other cohorts include professionals who want to better a lifestyle – also known as serial upgraders and teleworkers and small business owners who are now adding small offices to their homes.

Acknowledging that digital innovations are impacting the everyday lives of its customers - for example mobile banking – Peters said the business is also looking to apply such technologies to improve efficiency in the business. “We are looking at ways technology can make our brokers efficient. We don’t’ have deep pockets like the big banks, it’s just small steps for us but we are planning to upgrade our digital platform,” she said. The panel also discussed the impact of disruptors on the segment. “We think disruptors are positive for the sector. They create competition. We can certainly learn from the disruptors in the digital mortgage space,” Peters said. “The industry is ripe for disruption. There have been a lot of incumbents wo have been complacent. We have seen a lot of companies emerge that have put the customer at the centre of their processes. This should give us something to strive for,” she said. ING’s Evans highlighted the trend to use comparative broking sites to source information. “We might not see a lot of applications grow through these platforms, but they do play a role in empowering people to make a decision when they are dealing with brokers or the banks,” she said.

So how can banks and mortgage brokers meet the needs of this diverse group of refinancers? For ING’s Evans, you need to start from a service rather than a product perspective. “A lot is going on in the personal lives of this segment that is outside of paying off a mortgage. They are getting married or having children. There is a real opportunity for us to give them a sense of comfort at with their financial security,” she said. “It’s about ultimately about helping a person’s livelihood, not their mortgage.”

Given that buying a house is the single It’s about ultimately about helping a person’s livelihood, not their mortgage. Digital interactions While this segment is more comfortable with the home buying process – having done it before - Mortgage Choice head of customer engagement Nicole Peters said her business treats this segment as FHBs. “Their behaviour is still similar to that of FBHs. They still want a deep conversation. They want to understand their borrowing capacity, how much equity they have in their home. The want to understand the trust costs of upgrading,” she said. Peters also added the importance of insurance when working with this segment. “We take the area of insurance very seriously which is why we brought in a full financial planning service. This service will help them manage their debt commitments as well as give them peace of mind with income protection,” she said. Just like the FHB market, this segment is also comfortable with digital interaction, however, Evans was at pains to point out that “digital does not mean that you can’t do face-to-face. We can use both channels to provide a fantastic experience.” she said. By this, Evans said that customers want to use digital technology to allow them the convenience to transact or seek information when it suits them. The face-to-face interaction is about providing that extra comfort and assurance.

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Kate Wilson, RFi Group; Melanie Evans, ING


SPECIAL FEATURE

Investors: Democratisation, opportunities and risks Credit Union Australia (CUA), Australia’s largest credit union, has expanded its digital wallet services offering. Having already launched Android Pay with eftpos late last year, bringing Apple Pay to CUA’s eftpos rediCARD holders allows them to utilise their iPhones and Apple watches to make efficient and secure eftpos payments. There is a growing need for the democratisation of home ownership as investors look to tap into residential property as an asset class. This was the assessment made by BrickX CEO Anthony Millet as the summit. The platform began just a year ago and has already garnered 9,000 investors in its platform. The business enables investors to buy bricks – essentially part-ownership rights in a property. “Our business essentially allows investors access to the residential property market as an asset class. Investors can invest from $5,000 to $50,000,” he said.

Our business essentially allows investors access to the residential property market as an asset class. Investors can invest from $5,000 to $50,000.

Millett who believes that equity release products are “pretty horrible” but his solution allows older people who are asset rich but cash poor the opportunity to sell down part of their property on a

cash needs basis. “It is a real move towards to the democratisation of property ownership,” he said. The business invests in blue chip suburbs such as Double Bay in the Eastern Suburbs, this makes these assets defensive as house prices consistently perform across market cycles. Besides access to properties, the panel also discussed a number of risks in the marketing including cooling house prices, a key concern for investors. BT Private Wealth head Justan Kitchener who looks after several family offices noted that his clients are fairly diversified and while they may not have seen a dip for some time, he believes they will see price falls as an opportunity [to buy]. Yellow Brick Road general manager of lending Andrew Rasby chimed in, noting that property investing should be viewed for the long-term. Other risks include the move by banks to scale back the availability of interest-only loans, driven by the prudential regulator. CoreLogic general manger for benchmarking and industry solutions, Matt Carlson said some of these investors could struggle to pay off both the principal and interest component of their loans. He warned that financial institutions need to talk to their customers and work out the best way to pay off their debt before the interest-only loan comes off. BT’s Kitchener added that his business has taken a sharper focus on responsible lending. While it may lead to some “uncomfortable conversations” with their clients, such conversations were important to have. “The key here is education and letting our clients know why we need to ask these questions,” he said. While negative gearing, is touted to be scaled back, the panel believed that there won’t be any big changes given the vested interests of the large bulk of Australians who have taken advantage of such a strategy.

ARB - RFi MEDIA 17


RFi GROUP INTERVIEW

A S P E C I A L F E AT U R E INTERVIEW WITH

Tim Reed CEO, MYOB MYOB CEO TIM REED TALKS TO AB+F ABOUT THE BIG CHANGES HE HAS SEEN DURING HIS 28 YEAR, HOW THE BUSINESS IS TARGETING PAYMENTS AND HIS PLANS TO GET MORE WOMEN INTO TECHNOLOGY. CHRISTINE ST ANNE REPORTS.

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RFi GROUP INTERVIEW

H

aving started his career in technology in the early mid1990s, Reed has seen the big changes in the industry including the advent of the dot com boom and its subsequent bust. Back then, concepts such as the palm pilot and document storage have now morphed into initiatives that have had significant impact on the way people conduct their business and their lives. He acknowledges that the ability to have an online calendar sync with a hand-held device took years to eventuate, but it was the palm pilot that was catalyst behind that change while the idea behind document storage launched by Yahoo back in 1997 - although clunky and clumsy with the application of bandwidth – has culminated into a business like Dropbox with a market cap of $10 billion. “Although there were challenges back then, these businesses provided the functionality for today’s ideas. Yahoo’s initiative made it easy to have today’s documents in the cloud,” he said. It also serves as reminder that today’s initiatives may not always deliver but are critical to support innovation in the future. One of the most notable recent trends has been the emergence of the fintech sector. Reed sees obvious benefits from these businesses in helping SMEs particularly around better access to capital. “In the 15 years that I have worked with SMEs, there is one consistent theme. SMEs find it challenging to get funding to grow. It has been an ongoing conversation.” MYOB has already forged a deal with OnDeck. “We are delighted with the progress that OnDeck are making with our customers, but we don’t want to be just passive participants. By making our data available and working with businesses like OnDeck we are not closing ourselves from other relationships,” he said.

BANK PARTNERSHIPS The business currently has agreements with National Australia Bank’s small business financing service QuickBiz. By giving NAB permission to access MYOB’s data, SMEs can get a lending decision in 10 minutes. MYOB also has relationships with the other big three banks to provide direct bank account and credit card feeds to MYOB software, along with about 13 other financial institutions. On the topic of data, he sees a lot of positives from Australia’s move to an open data framework, but regulation will be key. “I personally believe that open data rules will be very positive for Australia and positive for SMEs, adding that data sharing will give businesses the ability to deliver a broad offering of tailored products. Decisions can be made with less friction and at a lower cost – all positive benefits for SMEs. However, confidence in data sharing is key and here the regulator should play a crucial role. One of the easy things for us to do is criticize regulators but they play an important role in providing confidence and certainty in the market,” he said. “I am hoping to have regulation that makes it clear on who owns the data, what the obligations are and who is responsible for data breaches. I am hoping the regulators will be able to answer these questions, so we can move forward with greater certainty.”

I am hoping the regulators will be able to answer these questions, so we can move forward with greater certainty. He also believes that fintechs will be well-positioned in the new data sharing world. “When I look at what fintechs can do and all data that is available that

can be pulled together to enable more information for lending decisions, I do think fintechs will live up to the hype. There is a huge opportunity for the sector to grow.” Reed also sees many opportunities around the payments sector and hopes that one day payment innovation will eventually lead to a cashless society. For Reed, the New Payments Platform (NPP) is “a huge strategic platform for the nation that could lead us to towards this future.”

A huge strategic platform for the nation that could lead us to towards this future. Kicked off on Australia Day, the platform with the support of 13 financial institutions including the big four will allow Australians access to real time payments. In particular he sees an opportunity in such a framework for businesses like MYOB to provide realtime payment services in a “frictionless environment”. “All 1,500 of us at MYOB understand that our company is about helping small businesses. It can be about simplifying payments or making it easy execute on superannuation payments,” he said. MYOB aims to make it easier for SMEs to manage their invoices and importantly receive quick payment on those invoices. He believes that the NPP will also be an enabler in driving a platform that merges accounting systems with banking systems - an environment, MYOB is wellpositioned to grow in. The business is in the process of building a platform that enables SMES, accountants and bookkeepers to “seamlessly collaborate with each other”. The platform will also develop with the mobile device in mind.

ARB - RFi MEDIA 19


RFi GROUP INTERVIEW

“We are building the capability for a lot more work to be done on a mobile device. What we are really trying to do is remove all the friction from tasks such as recording and reporting financial activity to the ability of business owners to raise and get paid on invoices." A coordinated approach to information gathering and reporting will also allow SMEs to use that central information for tasks such as reporting to the ATO or applying for a bank loan. “Rather than building individual parts, we are looking to build one platform that provides seamless processing for our SMEs. It is critical that we continue to provide differentiated services.” he said. BBQ STOPPERS This year will mark Reed’s 10 years as head of the firm, fifteen in total spent at the company. Since then, the business has grown from a market cap in the millions to around $2 billion. During that time, he has eyed a few competitors in the market and the rise new entrants like Xero. “Over the last 15 years, customers, journalists and friends at barbeques would ask me about competitors like QuickBooks or Reckon. Now people are talking about Xero, it’s always been a competitive industry,” he said. He adds that competition is key as it “forces companies and individuals to really dig deep and think more creatively and focus on solving the problem”.

Over the last 15 years, customers, journalists and friends at barbeques would ask me about competitors like QuickBooks or Reckon. Now people are talking about Xero, it’s always been a competitive industry. “Xero has done very well. In the time Xero has existed, our enterprise value has lifted $500 million to $2 billion. So, they have not done well at our expense. We have

20 ARB - RFi MEDIA

been able to build a good business during that period. We have become a better company because of competitors like Xero and dare I say, they have become a better company because of the competition we provide,” he said. The father of three children, Reed also has a passion for developing STEM (science technology, engineering, and mathematics) skills in Australia. Although he believes that STEM skills are going to be crucial in professions that are growing and booming such as technology, he adds that it’s not just about supporting software development. “These skills will also help in the future of customer service. There is a human element in that thinking and STEM skills underpin that. As soon as we can get a program that supports such skills imbedded in schools and the workforce then I think companies and industries will be better able to adapt.”

These skills will also help in the future of customer service. There is a human element in that thinking and STEM skills underpin that. As soon as we can get a program that supports such skills imbedded in schools and the workforce then I think companies and industries will be better able to adapt. However, while government does have a role play in supporting the development of these skills, Reed is passionate that businesses and parents also lead on the issue. He is also equally fervent on the issue of women in technology. Reed is a member of the STEM Male Champions of Change, a group of high profile men that includes business leaders. Its aim is to lead on gender diversity. In particular, he is hoping to encourage more women to participate in the technology sector. Reed will walk the

walk with this message and has already put in a strategy to boost the number of females in its software engineering team. The firm’s 40 per cent target of female participation – double the rate of women coming out of computer science degrees – has already exceeded its goal, with the business now employing 50 per cent of women in those roles.

The firm’s 40 per cent target of female participation – double the rate of women coming out of computer science degrees – has already exceeded its goal, with the business now employing 50 per cent of women in those roles.

They have achieved this target through providing internships in their design and product manufacturing team, what Reed calls the Future Makers team. The program also includes career development for mature women who don’t have a coding background but an aptitude for a scientific thought process. The program includes six months of paid training, helping them achieve an undergraduate level in computer sciences. For Reed, issues such as gender diversity and support for the sciences and technology will also underpin society’s ability to adapt to change. He highlights geopolitical themes such as Brexit and the election of Donald Trump as symptoms of change but remans confident in both democracy and society’s ability to embrace disruption. “We are living in a period of massive change, but this change is not new. We have had the agricultural revolution, big gains in labour productivity and now a decline in manufacturing and rise in professional services, health and education. As a society, however, we have proven to be resilient and to adapt to change quite well.”


RFi GROUP INTERVIEW

A S P E C I A L F E AT U R E INTERVIEW WITH

Rohit Lakhotia RELATIONSHIP DIRECTOR, WESTPAC AS A WINNER OF THE YOUNG BANKING AND FINANCE PROFESSIONAL AWARDS, WESTPAC RELATIONSHIP DIRECTOR ROHIT LAKHOTIA TALKS TO AB+F ABOUT PERSONAL BRANDING AND THE IMPORTANCE OF LEADING ON BUSINESS AND TRUST.

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RFi GROUP INTERVIEW

L

akhotia arrived Australia just over 10 years ago from India to pursue his professional studies in accounting, joining Westpac in 2010 as a business banker. Fast forward seven years later and he is now a Relationship director leading the Norwest commercial banking team in Sydney’s North Western suburbs. In the job, he looks after the top 15 clients for the bank as well as overseeing 10 staff who assist him running the dayto-day business. Lakhotia’s leadership of the commercial business team has seen revenue grow by a stunning 330 per cent. He now runs one of the largest portfolios that generate the highest revenue across commercial banking which supports growing and sustainable Australian businesses. He continues to deliver for the bank, achieving significant share of wallet with new customers fueling Australian businesses with optimum finance solutions. It's no surprise then that in 2016, he took out the most prestigious award of the evening, Overall Young Banking and Finance Professional of the Year award. Announcing the winner on the night, AB+F publisher Andrew Stabback said Lakhotia was selected based on his ability to not only meet but exceed expectations in his role and he also demonstrated strong leadership skills. Indeed, Lakhotia also scooped the award for the Young Commercial Banking and Finance Relationship Manager of the Year award. PERSONAL BRANDING “Australian businesses are the life blood of our economy and my role as a relationship director provides me with the platform to not only design financial solutions for dynamic businesses but also provides me with the opportunity to help businesses through challenging times,” he said at the time of the announcement. Today the Westpac banker acknowledges that the award validates that he has chosen the right path in his career. “The award has encouraged me to pursue excellence. It has given me not only a sense of pride in what I have achieved but recognition as a valuable team member to my colleagues,” he said. Importantly the award has also lifted his own personal branding within the bank – having been earmarked by the bank as being among its top talent. There are plans for Lakhotia to take on a Regional General Manager role in the NSW Business Banking - one of his near term aspirations - where he will be overseeing bigger commercial clients and leading a team of 30 to 40 people. He acknowledges that Westpac has played 22 ARB - RFi MEDIA

a key role in building “personal branding” and and the career path he has so far taken. “It has been a great organisation to work in. The bank has made a significant investment in my career. Westpac has been agile and inquisitive where I can explore and develop my leadership skills.” Westpac has provided Lakhotia with support for formal trading as well as opportunities to be seconded in different parts of the businesses across commercial banking and SME – in the capacity of a regional general manager. He has also been a beneficiary of the bank’s Business Institute developed by Westpac’s chief executive of the business bank David Lindberg. The in-house program developed in conjunction with the Australian Graduate School of Management provides professional development to its rising stars and there are plans underway to develop an MBA program. At the time of his award announcement, Lakhotia had noted to AB+F that it is often perceived that a banker only influences the financial outcomes for businesses, however, our responsibilities are far greater than our role. “It allows me to be a part of their journey and help them prosper and grow which has a wider social impact on Australians.” His typical day involves 40 – 50 per cent of time spent with clients, 20-30 per cent planning and leading the team and their clients and around 30-40 per cent looking at ways to to ensure the needs of its commercial clients are always addressed by structuring the right solution. HELPING BUSINESS PROSPER For Lakhotia, working with clients involves around two meetings a day. “The typical day for me is very dynamic and you are dealing with various businesses that are ever changing needs. Knowing our clients is important as I get to really understand, the rationale behind their need which assist us in structuring the right solution to help them achieve their desired outcome. I love to know and be a part of their story.” He sees his achievements as two-fold, helping his clients and his team. “Helping businesses prosper has always been my number one priority. I have helped support our commercial clients by ensuring they reach their goals – either by remaining a profitable business or by helping them go to a float.” He also ensures that his team are supported – something he is very proud of. “I have had a very positive influence over my peers in the past few years and likewise they too have had a positive influence on me. I will always try and better my achievements by always setting the higher

benchmarks.” Outside of his banking career, Lakhotia remains committed to supporting his community. He still has strong ties with India and is involved in children’s education and health, returning every year to help a not-for-profit organisation with planning for the year ahead. He remains proud and still aims to launch the charity, “A dollar can make a difference,” which support under privileged children around the world.

A dollar can make a difference. He also provided some advice to peers and those new to the industry. For Lakhotia, it is important to be yourself but also to keep learning. “Education leads to empowerment.” He believes this mantra is key in banking today, highlighting themes around blockchain, cryptocurrency, but also adding that the sector today is impacted by changes in other industries such as the automotive and service sectors.

Education leads to empowerment. “Banking today is very dynamic, and you need to be agile. You need to lead and given the disruption impacting the sector, you need to embrace change. A bad banker provides a problem for every solution. A good banker provides a solution to very problem,” he adds. Today’s banker also confronts an environment of increased scrutiny and public skepticism around conduct. With a Royal Commission already being rolled out this year, Lakhotia is under no illusions about the reality around trust and public confidence in banking and the responsibility starts with him. “We have had a world class banking system. Yet it’s amazing how the integrity of the world’s best banking system has been challenged. Trust in banking starts with me. How I enhance this trust is through my behaviour, the way I work with my team and my clients. You have to breath and live the values of your organisation. The banking system is going through challenging times but it will be stronger than ever before.”


TRANSACTIONS

Transactions CUA launches Apple Pay on its eftpos rediCARD WORDS SARAH NIESSEN

C

redit Union Australia (CUA), Australia’s largest credit union, has expanded its digital wallet services offering. Having already launched Android Pay with eftpos late last year, bringing Apple Pay to CUA’s eftpos rediCARD holders allows them to utilise their iPhones and Apple watches to make efficient and secure eftpos payments. CUA members will now be able to sidestep Visa and Mastercard’s longer contactless credit processing time by using their own money in real time via eftpos savings and cheque accounts. Prior to this, with the Visa or Mastercard credit system, transactions remained in the account history of consumers for a few days with a “pending” status. According to RFi Group data, the ability to instantly pay or transfer funds is highly important to over 60% of retail banking consumers, and while many consumers are still warming up to digital wallet services, Apple Pay has been consistently popular in 2017. CUA has expressed their excitement about offering the newest, secure and most convenient payment methods to their full range of CUA issued credit and debit cards. Matthew Lobdell CUA Head of Payments indicated that the credit union is focused on being available to members 24/7, allowing them to choose how they would prefer to interact with the provider.

HOW IMPORTANT ARE THE FOLLOWING CONSIDERATIONS IN YOUR ONGOING CHOICE OF AN EVERYDAY/TRANSACTION ACCOUNT?

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

63%

Highly Important (8-10) Neutral (3-7)

33%

Highly Unimportant (0-2)

4% Source: RFi Group, ASDC Transactions Nov-17 Survey

ARB ARB--RFi RFiMEDIA MEDIA 23


TRANSACTIONS

Visa and Mastercard move credit card security towards biometrics WORDS CORINNE BARRETT Many consumers have swapped swiping or inserting, for tapping their cards in payments, where the behaviour of entering a PIN and/or passcode may soon be a thing of the past. Late last year, Mastercard and Visa both announced plans to launch biometric authentication technology within Australia. Visa believes that the technology is going to become more common amongst Australians within as little as a year. According to RFi Group data, when choosing to make in-store payments, 3 in 4 transaction account holders rate convenience as the top consideration, closely followed by 56% rating security as the second consideration. Biometric payments have been positioned as both a more secure and convenient method of authentication and there is great possibility for it to overtake

PINs altogether with a more secure two-step verification security process. When asked about future take-up of biometric payments, almost 1 in 4 transaction account holders have indicated they would be likely to try it. The new technology is said to be used in conjunction with cards, which can be stored within a mobile wallet. The biometric card will be programmed with a securely stored template of your fingerprint, allowing convenient and secure card payments. With the likes of Apple Pay, Samsung Pay and Android Pay becoming a popular method, there still hasnâ&#x20AC;&#x2122;t been rapid uptake, with traditional options such as card and cash still being more commonly used.

PLEASE INDICATE HOW LIKELY YOU WOULD BE TO TRY USING THESE DIFFERENT TYPES OF PAYMENTS, SHOULD THEY BE MADE AVAILABLE TO YOU?

Unlikely (0-2)

Neutral (3-7)

Likely (8-10)

The new technology is said to be in conjunction with cards, which can

Biometric payments

27%

51%

Source: RFi Group, ASDC Transactions Nov-17 Survey

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22%

be stored within a mobile wallet.


TRANSACTIONS

The next steps for every day travel transactions WORDS SARAH NIESSEN

NSW transport minister, Andrew Constance recognises the success of Opal and believes expanding to alternative contactless payments could be the next level of choice to offer commuters.

Major Australian transport networks function on a “closed loop”, which means travellers need to use a unique preloaded card to use said services, such as Opal in Sydney and Myki in Melbourne. However, with the success of current trials, commuters in NSW may soon enjoy an “open loop” service utilising contactless payment features. Transport NSW and Mastercard began a contactless payment service trial mid last year allowing ferry commuters to use anything from contactless cards to smart watches rather than their standard Opal card to access transport services between Manly to Circular Quay. Given that RFi Group data indicates that over half of consumers have used contactless features available on their debit and credit cards, 2 in 3 of whom use the features weekly or more, this new initiative would require very little change in behaviour from most consumers. NSW transport minister, Andrew Constance recognises the success of Opal and believes expanding to alternative contactless payments could be the next level of choice to offer commuters. This trial will continue to run through 2018 to further inform any decisions regarding the expansion while additional cities Melbourne and Brisbane seem set to receive similar trials.

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SAVINGS

Savings CBA banking app set to save Aussies from ‘damage’ overspending WORDS SARAH NIESSEN

T

he Commonwealth Bank of Australia (CBA) has set to upgrade its current retail banking app, which will personally alert customers about their own account activity in an effort to boost long term financial wellbeing. These additional features include generic alerts for customers over spending on ‘damaging’ products like cigarettes, alcohol or gaming as well as notifications for windfall payments like tax returns to encourage smart, longterm financial choices without any product sales ploys. CBA’s head of digital, Pete Steel commented that the bank is concerned with customers having the right personal financial knowledge as well as customers being aware of the consequences of their spending choices in order to aid a healthy financial future. RFi Group data has identified in September 2017 that 53% of savers fall into a ‘struggling savers’ category. This segment is defined as savers who regularly withdraw money from savings to help pay for day to day expenses and need help to stop dipping into their savings in order to achieve their savings goals. With almost half of smartphone users saying they are using banking apps in 2017 to access their banking, CBA could be on the right track to helping a large chunk of their customers.

SAVER SEGMENTS

53% 35%

34%

5% Rate Chasers

Goal Savers

Struggling Savers

Accidental Savers

Data: RFi Group, ADBP Dec-17 Data: RFi Group, ASDC Savings Survey Sep-17

26 ARB - RFi MEDIA


SAVINGS

RFi Group data has identified in September 2017 that 53% of savers fall into a ‘struggling savers’ category.

ARB - RFi MEDIA 27


SAVINGS

Interest rate update: RBA holds interest rates at 1.50% for February WORDS SARAH NIESSEN The Reserve Bank of Australia (RBA) held record low cash rates at 1.50% for February 2018. Governor Phillip Lowe said, “the low level of interest rates is continuing to support the Australian economy” and the rate, which has not moved since August 2016, has helped gradual inflation stabilisation and allowed progress in reducing unemployment. Having been several years since the last cash rate increase, Steve Mickenbecker, Executive of Financial Services at Canstar Group has indicated that the knock-on effect on savings rates will result in seeing savers struggle to find a savings rate over 3%. Of course, bonus rates are on offer but only if customers can satisfy criteria. According to RFi Group data, this news will be particularly disappointing for 34% of savings account holders who are identified as ‘rate chasing’ savers and consider interest rates highly important. Savers looking for the best returns will likely have to wait sometime as Oxford Economics’ Head of Macroeconomics Australia, Sarah Hunter, claims they “don’t see the Board raising the cash rate until the second half of 2019.”

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“Don’t see the Board raising the cash rate until the second half of 2019.”

Sarah Hunter, Head of Macroeconomics Oxford, Australia


SAVINGS

Rise in gig economy puts a damper on super balances WORDS CONNIE CHAN An increased desire for flexibility in recent years has led to a growing number of Australians working in the gig economy. Recent figures show the number of gig workers on various platforms has increased substantially in the last year alone, from around 100,000 to 150,000. This rise in the number of gig workers and freelances however has profound consequences for the distant future when it comes time for these individuals to retire, as many choose not to pay into their superannuation. Currently there are no requirements for self-employed individuals, which gig workers are classified as, to make compulsory payments into a superannuation fund. In comparison, employed individuals receive a super contribution of 9.5 percent of their salary into a superannuation fund from their employers. While a hundred dollars here or there in present days seems little to worry about, the compounded impact of

such will determine how comfortably these individuals will be able to retire. Figures from the Association of Superannuation Funds of Australia (ASFA) show selfemployed males have an average super balance of around $155,000 compared to that of $386,000 for male wage and salary earners. The difference is just as stark for females who already suffer lower superannuation balances than their male counterparts ($86,000 versus $159,000).

This rise in the number of gig workers and freelances however has profound consequences for the distant future when it comes time for these individuals to retire, as many choose not to pay into their superannuation.

ARB - RFi MEDIA 29


MORTGAGES

Mortgages Home lending restrictions may be relaxed if property prices fall WORDS AARON TAN

F

ederal treasurer Scott Morrison stated that the government is tracking the declining housing market and indicated that changes could be made to the stricter lending rules that were introduced over 2017. The falling house prices, especially within Sydney, have been a result of lending regulations; property prices in Sydney have declined for the 5th consecutive month. According to Morrison, who has been conducting regular meetings with APRA to discuss the Council of Financial Regulators’ process, the regulator’s actions to control growth of investment lending and the amount of new interest only loans have been effective in allowing for a “soft landing”. Banks are recommended to continue limiting growth of lending within certain segments such as high loan-to income loans or high LVR loans.

Banks are recommended to continue limiting growth of lending within certain segments such as high loan-to income loans or high LVR loans.

The current slowing of house price growth from 17% to about 3% is well received by Morrison. Economists expect housing prices to slow even further, with NAB forecasting an increase of just 0.7% in 2018.

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MORTGAGES

Economists expect housing prices to slow even further, with NAB forecasting an increase of just 0.7% in 2018.

ARB - RFi MEDIA 31


MORTGAGES

Westpac doubles investment in online broker uno Home Loans The first round of investment made in uno Home Loans by Westpac was for $16.5m in 2016 when the company first launched. In 2017, two additional rounds of funding for uno brought the investment to $26.5m. To get a share of the $2bn annual mortgage broking revenue, Westpac has recently doubled its investment in uno by $25m to $51.5m, giving it approximately 81% ownership stake. While uno Home Loans currently only has less than a 1% share of the mortgage market, it aims to increase that share to about 10% in the next 10 years; within the first financial year, the business grew by 600%. The companyâ&#x20AC;&#x2122;s founder and CEO Vincent Turner stated that uno is focused on marketing its business model as a separate option from brokers and does not intend on competing with traditional brokers. Instead, he intends for the company to focus on the digital mortgage service category. According to RFi Group data, 72% of mortgage holders who completed their most recent application through a broker indicated that they did not use other channels throughout the entire application process. Uno Home Loans currently has 22 lenders on its platform, including the Big 4 banks; however, about 2 in 3 loans are settled through non-majors.

WAS MORE THAN ONE CHANNEL USED TO COMPLETE YOUR APPLICATION FOR YOUR MOST RECENT LOAN? IF YOU USED MORE THAN ONE CHANNEL, PLEASE SELECT THE CHANNELS THAT YOU USED AT DIFFERENT STAGES: Number channels used throughout entire application process â&#x20AC;&#x201C; By final application channel

Did not use single channel throughout entire application process Used single channel throughout entire application process 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

28% 48%

72%

Broker

52%

Branch

58%

42%

Mobile lender Data: AMC Dec-17

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48% 68%

79%

52% 32% Online

21% Phone

Total


MORTGAGES

This is almost double the inflation rate, with a rate of increase that is the fastest in 7 years.

Increase in mortgage interest repayments is at its fastest in 7 years While the Reserve Bank of Australia has continued maintaining the cash rate at the same level for the last 16 months, data from the Australian Bureau of Statistics(ABS) shows that the cost of mortgage interest repayments for employed Australians has risen by 4.5 percent since December 2017. This is almost double the inflation rate, with a rate of increase that is the fastest in 7 years. There has been an average increase of about 40 basis points in investor mortgage rates because of new capital requirements from lenders, resulting in a declining demand for investment properties. However, Tim Lawless, CoreLogicâ&#x20AC;&#x2122;s head of research, expects demand in the housing market to continue being reinforced by low mortgage rates and high population growth. RFi Group data shows that 46% of property owners consider the ability to switch from variable to fixed rates to be highly important, while only 39% consider splitting between fixed and variable rates to be important. Canstar Group Executive Financial Services Steve Mickenbecker stated that fixed rates are increasing in popularity compared to two years ago, with ABS data showing that proportion of fixed rate loans has increased by 4.4 percent to 15.8 percent of total loans.

HOW IMPORTANT ARE THE FOLLOWING FEATURES OF YOUR MOST RECENT LOAN? % Highly important (8-10 out of 10) 50%

46% 39%

40% 30% 20% 10% 0% Ability to switch from variable to fixed rate

Ability to split your loan between fixed and variable interest rates

Data: AMC Dec-17

ARB - RFi MEDIA 33


CARDS

Cards

NAB stops applications for Virgin Australia Velocity Frequent Flyer reward credit cards WORDS HUW GRIFFITHS

N

AB has announced that customers will no longer be able to apply for Velocity Frequent Flyer credit cards, as the bank looks to focus its attention on its NAB Rewards card line, which launched last year. NAB rewards offer unlimited points during spending which can be redeemed on over 1,500 goods and services, as well as for Velocity Points. While new applications will not be accepted, current Velocity Frequent Flyer cardholders can continue using existing cards to make purchases and earn rewards points. RFi Group data from the December 2017 Australia Credit Card survey shows that 12% of credit card holders are intending to apply for a new credit card in the next 12 months, with just over half of these credit cardholders looking for a new rewards credit card. NAB is hoping to capture some of these potential applicants by updating its product range. A NAB spokesperson who spoke with Canstar said â&#x20AC;&#x153;NAB regularly reviews its range of credit cards to make sure we continue to provide customers with products that suit their needsâ&#x20AC;?.

50%

IN THE NEXT 12 MONTHS DO YOU INTEND TO APPLY FOR A NEW CREDIT CARD? Yes. By FOW issuer

40%

30%

20%

20% 14% 11%

10%

10%

10%

Westpac

NAB

12%

0% AMEX

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ANZ

CBA

Total


CARDS

NAB regularly reviews its range of credit cards to make sure we continue to provide customers with products that suit their needsâ&#x20AC;?.

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CARDS

With the devaluation of this credit card, Woolworths Money customers may look to shift their card spend elsewhere to maximise its earn rate.

Woolworths reduces Qantas frequent flyer earn rate Woolworths Money customers who use the Woolworths Qantas Platinum Visa card will face lower earn rates for Qantas frequent flyer points starting April 1st. The earn rate will decrease from one Qantas Point per $1 for the first $2,500 monthly spend, down to 0.5 Qantas Points per $1 for all everyday purchases. However, any purchases made directly at Woolworths, Big W, Caltex, BWS, Dan Murphyâ&#x20AC;&#x2122;s or Cellarmasters will continue to earn one Qantas Point per $1 spent. Direct transactions with Qantas, for example flights or lounge membership, will continue to earn a bonus point, but with the reduction being implemented, the overall rate will also be reduced. The previous rate of 2 Qantas Points per $1 will now fall to 1.5 Qantas Points per $1 spent. RFi Group data shows that 35% of cardholders use their most frequently used card (FOW) because of the rewards program and is likely a main driver for Woolworth Qantas frequent flyer card usage. With the devaluation of this credit card, Woolworths Money customers may look to shift their card spend elsewhere to maximise its earn rate. It is worth noting that while the Woolworths Qantas Platinum Visa card is experiencing significant reductions to its earn rate, other Woolworth Money credit cards will be unaffected, with conversion rates into Qantas Points remaining the same. 36 ARB - RFi MEDIA


CARDS

Afterpay popularity continues to rise, while credit card debt falls Over the last year, credit card debt has fallen according to analysis conducted by the Australian Bankers’ Association (ABA). This is the third time in history that this has occurred, with the overall outstanding balance decreasing by $260 billion to $52.2 billion. According to ABA Chief Economist, Tony Pearson: “Overall credit card holders are becoming more financially savvy, taking card to repay debt and keep their interest costs low. Last year Australians spent nearly $325 billion on credit cards, but repaid $341, $16 billion more than they spend”. Decreasing credit card debt has also lead to cardholders using a smaller percentage of their available limit with this now sitting at 34%.

RFi Group data currently shows that in Nov-17, 50% of transaction account holders are aware of BNPL services, up from 32% just 6 months earlier.

There has been a recent shift in attitudes amongst Australian consumers with many using Buy Now Pay Later services (BNPL). These services allow shoppers to make a purchase and pay it back via instalments, with it generally being spilt over 4 payments. RFi Group data currently shows that in Nov-17, 50% of transaction account holders are aware of BNPL services, up from 32% just 6 months earlier. In addition, the usage of BNPL services has increased from 14% up to 17%, illustrating the rapid growth and appetite for these services.

ARB - RFi MEDIA 37


PERSONAL LOANS

Personal Loans

Fixed interest rate borrowers on the decline WORDS JAPESH RAISINGHANI

A

round 1 in 6 owner occupiers are deciding on fixing their home loans whilst the remaining are sticking to variable rates and speculating on how interest rates behave in 2018. The Australian Bureau of Statistics figures in November 2017 show that about 16% of owner occupiers turned to fixing their interest rates, a drop from 19% in August 2017. RFi Group data suggests that the proportion of prospective borrowers who intended to take out a fixed rate loan has dropped significantly from 59% in Mar-17 to 46% at the end of 2017. Lender MEâ&#x20AC;&#x2122;s spokesperson, Matthew Read, stated that concerns over an increase of cash rate could result in more people fixing loans, however, there are other factors to be noted as well. He went on further

38 ARB - RFi MEDIA

to say that the main benefit of fixing in interest rates is that there is no repayment ambiguity. It provides solace to know that repayments will not be changing over the time frame of the loan. An additional benefit is borrowers locking in interest rates just before a variable interest rate rise. However, there are cons to fixing such as the charges for breaking the deal earlier and there are limitations to how much one can repay each year. Majority of these deals do not come with offset accounts to assist in reducing the overarching interest charges. An additional benefit is borrowers locking in interest rates just before a variable interest rate rise.


PERSONAL LOANS

Approximately one in ten prospective borrowers consider Westpac as their first choice of institution to borrow from.

WHICH OF THE FOLLOWING TYPE OF INTEREST RATE WILL YOU APPLY FOR ON YOUR LOAN? Trended

Fixed rate

Variable rate

Unsure

100%

48%

80% 60%

31% 21%

21%

22%

26%

19%

33%

21%

40% 20%

48%

53%

Mar-16

Sep-16

59%

46%

0% Mar-17

Sep-17

Source: Australian Consumer Lending Council 2017

ARB - RFi MEDIA 39


PERSONAL LOANS

Harmoney adopts AI to assist with personal loan applications Peer-to-peer provider, Harmoney, has partnered up with DataRobot, an automated machine learning platform, in the hope to improve turnaround times and accuracy of its personal loan application process. Brad Hagstrom, joint-CEO of Harmoney stated that with the rolling out of DataRobot, they are now using artificial intelligence to decrease the risk taken by their lenders. This new partnership has resulted in the personal loan provider to brag reduced turnaround times from application to funding in less than 24 hours. RFi Group data suggests that slightly more than 1 in 3 borrowers who took out their loan with an alternative lender chose the lender based on fastest approval time. A human may no longer be responsible for approving personal loans anymore with Harmoney integrating machine learning technology to better the precision of a borrowerâ&#x20AC;&#x2122;s credit risk assessment upon application. This technology determines if a borrower is trustworthy enough to make the necessary

40 ARB - RFi MEDIA

repayments on their loan, translating to decreased amounts of risk for both borrowers and investors using a P2P platform. Hagstrom further added that as these models have proven to be so accurate in predicting credit default, Harmoney has thus been able to increase profitability of lenders, decrease costs for borrowers and improve its position in the market when compared to other alternative lenders.

A human may no longer be responsible for approving personal loans anymore with Harmoney integrating machine learning technology to better the precision of a borrowerâ&#x20AC;&#x2122;s credit risk assessment upon application.


PERSONAL LOANS

NAB finds cure to payday loan issue NAB has recently announced the introduction of a new loan service named Speckle, which has been created with the intention to provide a low-cost substitute to borrowers who require a payday loan. NAB has worked with a not-for-profit institution Good Shepherd Microfinance since 2003, aiming to provide low to no interest rate loans to people who are financially susceptible and NAB hopes that Speckle will lengthen this agreement. Speckle has combined traits from other payday lenders to create a foundation, such as quick turnaround times and simple online applications. Speckle notes that most loans are given the green light within 2 hours and funds are normally transferred within 2 working days. However, it really sets itself apart from others by tackling the cost quotient.

NAB has worked with a not-forprofit institution Good Shepherd Microfinance since 2003, aiming to provide low to no interest rate loans to people who are financially susceptible and NAB hopes that Speckle will lengthen this agreement.

The Australian Securities and Investments Commission (ASIC) has intensely regulated the small amount credit (SACC) market resulting in lenders not being able to charge more than a 20% establishment fee and a 4% monthly fee for loans up to $2,000. Speckle has chopped this in half and borrowers can now apply for a loan between $200 and $2,000 and pay a 10% establishment fee and a monthly fee of 2%. Repayment can be between 3 â&#x20AC;&#x201C; 12 months. RFi Group data suggests that 51% of current borrowers are uncomfortable (0-2 out of 10) with borrowing from Payday lenders and 59% of borrowers are uncomfortable with borrowing from a Payday lender as they think a loan from them would be expensive. With the advent of Speckle, maybe we can expect a change in these statistics.

ARB - RFi MEDIA 41


PAYMENTS & DIGITAL

Payments & Digital

Commonwealth Bank of Australia introduces AI chatbot “Ceba” to assist customers with their banking tasks WORDS AARON TAN

C

eba, an AI-based chatbot launched by Commonwealth Bank of Australia (CBA), will be available to customers 24/7 and allow them to conduct over 200 different banking tasks. According to RFi Group data, 21% of smartphone/tablet owners consider chatbots highly appealing. Customers can ask Ceba for assistance in almost 60,000 various ways, all of which will be recognisable by the chatbot. The service is currently available to 1 in 5 Netbank customers, with a full roll out expected in the next few months. The chatbot seeks to provide a smooth and comprehensive experience for customers; for specific tasks such as reporting fraudulent activities or more complicated product applications, the chatbot also provides a secure banking channel for customers, allowing them to speak to a bank representative as required.

42 ARB - RFi MEDIA

Pete Steel, CBA’s Executive GM of Digital, believes that AI will play a significant role in providing a more personal, customised experience for consumers. However, despite the effectiveness of AI, there are concerns about how AI automation is affecting the workforce, with NAB announcing that it expects to have a decline of almost 4000 staff by 2020 because of a restructuring shift towards automation. An example of this would be NAB’s launch of a digital virtual banker in September targeting business customers.


PAYMENTS & DIGITAL

Customers can ask Ceba for assistance in almost 60,000 various ways, all of which will be recognisable by the chatbot. The service is currently available to 1 in 5 Netbank customers, with a full roll out expected in the next few months.

HOW APPEALING DO YOU FIND AN... Highly appealing (8-10 out of 10) Trended Dec-16

Mar-17

Jun-17

Sep-17

Dec-17

50% 40% 30% 20%

26% 20%

21%

21%

21%

10% 0% Online live chat (automated bot) - helps you with your banking enquiries Data: ADBP Dec-17

ARB - RFi MEDIA 43


PAYMENTS & DIGITAL

No ‘cryptocurrency crackdown’ from Westpac, ANZ, and NAB in development WORDS STEPHANIE SALAFIA Australian major banks – Westpac, ANZ, and NAB – have spoken out about the increasingly popular trade of cryptocurrency in recent days, outlining that there is no plan to ban customers from using their accounts to engage with cryptocurrency. This differs from major banks overseas, such as Lloyds Banking Group (UK) and JP Morgan, Bank of America, and Citi (US) who have taken the approach to prevent customers from using credit cards to buy cryptocurrency. Yet, Westpac, ANZ, and NAB have all expressed security concerns about the booming crypto market, particularly in relation to fraud. These security concerns will be monitored carefully and may result in similar restrictions to customer engagement with the digital market, mentioned above.

According to RFi Group data, 1 in 3 smartphone users aged between 18 and 44 are interested in services that allow engagement with cryptocurrency in the offline market.

According to RFi Group data, 1 in 3 smartphone users aged between 18 and 44 are interested in services that allow engagement with cryptocurrency in the offline market. Despite this, appeal is more pronounced in people aged 18-34 compared to 35-44 demographics (20% v 13% consider it highly appealing). This shows that there is a significant portion of people, particularly in the younger age ranges, who do engage within this digital market, and may be impacted by any restriction introduced by major banks.

TO WHAT EXTENT DO YOU FIND SERVICES WHICH LET YOU USE CRYPTOCURRENCY AT ATMS/SHOPS APPEALING? By age

Extremely unappealing (0-2)

Extremely appealing (8-10)

Unappealing (3-4)

Appealing (6-7)

100%

20% 80% 60% 40%

13% 19%

25% 21% 19%

23%

12% 18%

34%

3%

6% 12% 10%

14%

13%

13% 20%

9%

Neither (5)

11% 15% 17% 12%

70% 47%

44%

0% 18-34

35-44

45-54 Data: ADBP Dec-17

44 ARB - RFi MEDIA

55+

Total


PAYMENTS & DIGITAL

Say goodbye to credit cards, and hello to payment rings WORDS STEPHANIE SALAFIA Digital technology is constantly advancing; this is the case within business and financial services – from credit cards, to contactless payments such as Apple Pay, and now, to wearable accessories. Bankwest has introduced the “Halo” ring - this white ceramic or simple black ring, links to a transactions account, utilising the same contactless technology from Mastercard in credit cards or debit cards. Although consumers are currently required to go into a branch to make changes to accounts linked to the ring, the “Halo” ring is more convenient and secure than normal credit/debit cards. This is because by having the ring securely attached to your finger it will be harder to lose it or have it stolen. Furthermore, given there are no identifying marks on the ring, this allows the consumer to discreetly wear the technology. Data collected by RFi Group on smartphone/tablet users recorded that almost 1 in 2 smartphone/tablet users have concerns about wearable technology relating to theft and misplacement. With this in mind, the features offered by Bankwest’s “Halo” ring may help to alleviate these specific issues.

WHAT WOULD BE YOUR MAIN CONCERNS ABOUT MAKING PAYMENTS WITH WEARABLE TECHNOLOGY? Top 2 concerns

50%

49%

48%

Bankwest has introduced the “Halo” ring - this white ceramic or simple black ring, links to a transactions account, utilising the same contactless technology from Mastercard in credit cards or debit cards.

40% 30% 20% 10% 0% It can be easily stolen from my body

I could easily lose it

Data: ADBP Dec-17

ARB - RFi MEDIA 45


ABOUT RFi GROUP

RFi Group is a global intelligence and digital media provider focusing exclusively on financial services. We specialise in data and information gathering, customer based insight generation and business decision support for the worldâ&#x20AC;&#x2122;s leading financial service providers. Our aim is to combine global intelligence and local knowledge to provide insightful, valuable and actionable recommendations, with a core focus on the provision of exceptional client service. OUR BRANDS

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 Groupâ&#x20AC;&#x2122;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

For any advertisement en, please contact your regional RFi office or email your enquiry to agrisaffe@rfigroup.com For more information, visit: www.rfigroup.com www.globalretailbanker.com

46 ARB - RFi MEDIA

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ABOUT RFi GROUP

RFi GROUP ACTIVE IN 44 INTERNATIONAL MARKETS

Our markets include Australia, Argentina, Belgium, Brazil, Canada, Chile, China, Colombia, Egypt, France, Germany, Hong Kong, India, Indonesia, Ireland, Israel, Italy, Japan, Korea, Kuwait, Lebanon, Malaysia, Mexico, Netherlands, New Zealand, Nigeria, Peru, Philippines, Poland, Qatar, Saudi Arabia, Singapore, South Africa, Spain, Sri Lanka, Switzerland, Taiwan, Thailand, Turkey, UAE, UK, Uruguay, USA and Vietnam.

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ARB - RFi MEDIA 47


G LO B A L D I G I TA L B A N K I N G CO U N C I L RFi GROUP’S GLOBAL DIGITAL BANKING COUNCIL IS A COMPREHENSIVE RESEARCH STUDY, PROVIDING INSIGHTS ON THE DIGITAL BANKING BEHAVIOURS AND PREFERENCES OF 1,000 CONSUMERS PER MARKET IN 10 COMPARABLE MARKETS ACROSS THE GLOBE – THE US, MEXICO, CANADA, UK, FRANCE, INDIA, HONG KONG, CHINA, SINGAPORE AND AUSTRALIA.

LATEST INSIGHTS NOW AVAILABLE – NOVEMBER 2018 SURVEY KEY INSIGHTS FOR FINANCIAL SERVICES ORGANISATIONS IN AUSTRALIA INCLUDE:

Adoption, uptake, consideration, sentiment and the role of the traditional bank

Banks v’s fintech’s v’s telecoms v’s government – Who do consumers trust with their finances and personal information and how is this changing?

Biometrics, chatbots, robo-advice, augmented reality or virtual reality – What will be the next big thing in banking?

Are we moving ever closer to a cashless society and via which route?

Key examples of banking innovation driving uptake and satisfaction with consumers globally

For further information, please contact Julien Wilson, Commercial Director – AU & NZ on jwilson@rfigroup.com or +61 422 462 722 48 ARB - RFi MEDIA

Australian Retail Banker - March 2018 Edition  

An RFi Group publication

Australian Retail Banker - March 2018 Edition  

An RFi Group publication