The Digital Payment Boom in India

From The IMFBlog.

What does a shoe shiner in India have in common with central bankers and finance ministers? They both can appreciate the digital-payment boom. It’s sweeping the world but has accelerated in India, where last November the government demonetized—declaring that 86 percent of the country’s currency in circulation would cease to be legal tender.

Mobile payment platforms like Paytm, stepped in to fill the void left by demonetization, and in the process­- are bringing more people into the banking fold. In this podcast, Paytm Chief Financial Officer Madhur Deora says he was not all that surprised when the invitation came to speak at the IMF-World Bank Annual Meetings.

“All bodies around the world—whether they’re central banks, the IMF, World Bank or the World Economic Forum—are seeing this as perhaps one of the top two or three changes or developments around the world that can have the biggest impact,” Deora said.

And the scale of that impact is significant, he said.

“Some of the problems that have existed for decades, 50 years, maybe 100 years in some places—we really have the opportunity to solve a lot of those problems over the next, literally, five years,” Deora said.

He gives the expanding use of smart phones a lot of the credit. Until four years ago, mobile payments didn’t exist in India. But smart-phone penetration has grown, and in the next few years, he sees 60-70% of the population having smart phones.

Beyond payments, the digital platform also allows those who previously couldn’t open a bank account or get a loan access to an array of financial services and products.

“We can solve for borrowing, access to credit. We can also solve for access to savings products, because our distribution is very, very cheap,” he said.

For finance chiefs and central bankers, digital payments allow them to more accurately assess the economy, as well as tax more efficiently.

While some may be leery of regulation, Deora sees it as a help, not a hindrance, to problems related to a country’s development.

“Lack of financial inclusion, which is present in most emerging markets is a problem that bothers well-meaning central bankers. I think regulators around the world have woken up to the fact that technologies can solve those problems,” he said.

This all may sound as if the entrepreneur has become a budding expert in development.

“I think that might be pushing it a bit, but we certainly see the potential for social impact. We see that this has some behavior-changing outcomes, and perhaps, very soon, some life-changing outcomes,” Deora said.

Listen to the podcast here:

Mobile-First Digital Banking Strategy Takes Hold In The Midwest

From S&P Global.

Banks across the U.S. are adopting a mobile-first strategy for their digital offerings, and the Midwest is no exception.

U.S. consumers value their mobile bank apps more than ever, and expectations for these products are growing increasingly sophisticated. Once-novel mobile features such as photo check deposit and bill pay are now table stakes, and banks seeking to offer a competitive digital experience have to evaluate an ever-evolving range of services.

S&P Global Market Intelligence’s 2017 U.S. Mobile Banking Landscape includes regional insights from our 2017 mobile banking survey and details on the features available in the apps of dozens of U.S. financial institutions, including more than two dozen large banks and 45 companies with less than $50 billion in assets. The latter group consists of five smaller regional and community banks from each of the nine U.S. census divisions. This article focuses on the Midwest, which includes the East North Central and West North Central census divisions.

Our survey found that Midwestern mobile banking customers are most interested in seeing credit score information added to their apps. Consumers’ preoccupation with their credit files is only likely to intensify in the wake of the Equifax data breach. Few of the regional bank apps from around the country that we recently reviewed provide access to this information, although First National Bank of Omaha makes it available to consumer credit card customers.

Which bank app features are missing? (%)

Another highly valued feature for bank app users is fingerprint login, which many Midwestern banks offer. But with the rollout of Apple’s new iPhone X and other evolutions in mobile technology, banks across the country are increasingly having to pay attention to alternative forms of biometric authentication, including face ID. Banks are responding to their customers’ desire for even more convenient access to account information by allowing them to view their balances without logging in to the app.

Customers also want access to certain card controls via their bank apps, including the ability to temporarily switch cards on or off, and to report them lost or stolen. Jefferson City, Mo.-based Central Banco. Inc. and Sioux Falls, S.D.-based Great Western Bancorp Inc. are among the institutions planning to roll out such features in the near future, while Saint Paul, Minn.-based Bremer Financial Corp. makes certain card controls and account alert management available through a separate, third-party app.

The availability of certain features is just one way to assess the quality of a mobile offering. Customers who provide app store reviews clearly value speed, reliability, and an intuitive layout, and they seem to prefer having all features available on one platform.

Central Bank is redesigning its whole app for release next year, with the goal of providing a more user-friendly experience by streamlining navigation and better surfacing popular features such as person-to-person payments. The bank is taking the mobile-first approach seriously, as mobile logins have overtaken desktop logins, and about 65% of the company’s digital traffic is coming through phones.

Great Western Bank, whose deposits are primarily spread across Nebraska, Iowa, South Dakota, and Colorado, also hears from customers that they want improved core functionality, for example, faster transaction alerts. Great Western uses a niche digital vendor for its mobile channel and believes this is more advantageous than using a standard package from core systems providers.

The Midwest is home to some of the nation’s few mobile-ready ATMs. Chicago-area Wintrust Financial Corp. is a relatively early adopter of Cardless Cash, which lets the customer scan a QR code with their smartphone instead of using a debit card to withdraw money. In a competitive banking environment, and especially in heavily banked areas, financial institutions are keeping an eye on customer attrition and looking for an edge. This sometimes means making investments in new ATM hardware or services like mobile P2P payments that do not necessarily add revenue but that have become part of what customers expect from their banks.

It is difficult to quantify the value of a high-quality mobile banking experience, but our survey results give an idea of how important it is to consumers. Despite being generally fee-averse, more than 40% of survey respondents from the Midwest indicated that they would be willing to pay $1 per month to use their bank apps, while more than 20% said they would pay $3 per month. Respondents from the East North Central census division, which includes Indiana, Illinois, Michigan, Ohio and Wisconsin, were more willing to pay a fee. Although banks are unlikely to start charging for their digital services, satisfied mobile banking users could prove stickier deposit customers even as rates continue to rise and other institutions tempt them with promotional offerings.

When it comes to delivering products and services, banks of all sizes have a high bar to meet. Large, deep-pocketed institutions are constantly innovating with their digital channels, and it is not easy for their smaller peers to keep up. But many regional and community banks boast sophisticated mobile apps with desirable features that are not yet ubiquitous among the nation’s largest banks. In a banking landscape populated by fewer branches and with visits to those locations by tech-savvy customers on the decline, the combination of a strong local brand and robust digital experience could give smaller banks a competitive edge.


The 2017 mobile banking survey was fielded online between January 26 and February 1 across a nationwide random sample of 4,000 U.S. mobile bank app users 18 years and older. Results have a margin of error of +/- 1.6% at the 95% confidence level based on the sample size of 4,000.

S&P Global Market Intelligence researched mobile apps in June 2017 for more than two dozen financial institutions, including the biggest retail banking franchises in the U.S. and various large regional and branchless banks. Between September 18 and November 10, S&P Global Market Intelligence researched mobile apps for 45 smaller regional players and large community banks. The latter analysis focused, for the most part, on the top five retail deposit market share leaders with under $50 billion in assets in each of the nine U.S. census divisions.

This research is based on product descriptions available on bank websites and in app stores, as well as company-provided information. Some companies may have subsequently updated their apps or may offer additional features and services. Our analysis does not necessarily reflect functionality or services available through text banking, mobile browsers or secure messaging.

Suncorp opens the doors of its Sydney Discovery Store

Suncorp has opened their Discovery Store in Sydney’s CBD. It is designed as a flexible, customer centric space, including third party brands and will be open 7 days a weeks. It will be interesting to see how this move fairs against the strong drift to digital based banking which we are observing, but some might draw parallels with the tech-sector retail flagships; we will see.

You can read more about customer channel preference in our recently published The Quiet Revolution Report, available for free, on request.

Customers will be treated to a unique retail experience, a first of its kind for financial services in Australia, with Suncorp opening the doors to its new Discovery Store in Sydney’s Pitt Street Mall today.

The Suncorp Discovery Store is designed to be a destination for customers, where they can access end-to-end solutions tailored to their life events. It draws on all of Suncorp’s brands as well as our innovative third-party providers. Discovery Store delivers an immersive retail journey, where visitors can attend events, interactive workshops and explore solutions tailored to their life goals.

Suncorp CEO Customer Marketplace Pip Marlow said it will be a new experience, which is designed to make financial solutions simpler and more accessible.

“We’re shifting the focus from products and services, to having  conversations that are more about our customers’ aspirations, whether it’s home ownership, saving for a holiday or buying a car, so we can create value for them,” Ms Marlow said.

The store lay-out has been designed with a range of flexible spaces and interactive digital tools, built around a central amphitheatre.

Each month the entire space will be transformed to deliver a brand-new customer experience, with innovative product showcases, guest speakers and workshops focused on improving financial wellbeing.

“We want visitors to really take advantage of the space, drop in, have a coffee and wander around to see what’s on offer. Pitt Street Mall is one of Australia’s busiest retail precincts. It’s not just a place to shop, but also where people socialise and immerse themselves in new brands and experiences,” Ms Marlow said.

The Discovery Store will be open 7 days, including late trading. The upper level of the store is dedicated to customer conversations, learning and interactive workshops, while downstairs provides transactional banking services and access to other financial services specialists.

Key features:

  • First of its kind financial services offering to open in Pitt Street Mall.
  • Access to the breadth of Suncorp’s brands, products and services, and third-party partner solutions.
  • Suncorp’s Australian brands: Suncorp (Insurance and Banking), AAMI, GIO, Bingle, Apia, Shannons, Terri Sheer, CIL, Vero, Asteron Life and Resilium.
  • Convenient trading hours: open 7 days and open for late trading. Spans 446 square metres.
  • A community hub with free wi-fi and coffee.

The RBA on ATM’s

The recently published RBA Bulletin included an article “Recent Developments in the ATM Industry”. The article shows that the number of ATMs in Australia is very high relative to population, thanks to significant growth in third party fee for service machines. Now that the banks have announced they will not charge for foreign withdrawals, the RBA says third party players – like owners of petrol stations and convenience stores may see a decline in income, and that overall declines in transaction volumes are likely to reduce the number of machines available, especially in regional areas.  That said, many independently owned ATMs are in convenience locations not serviced by bank ATMs (such as pubs and clubs) and so they may be shielded somewhat from this competitive pressure. But many consumers will end up paying even higher fees to use these machines, which may be the only options for some.

The ATM industry in Australia is undergoing a number of changes. Use of ATMs has been declining as people use cash less often for their  transactions, though the number of ATMs remains at a high level. The total amount spent on ATM fees has fallen, and is likely to decline further as a result of recent decisions by a number of banks to remove their ATM direct charges. This article discusses the implications of these changes for the competitive landscape and the future size and structure of the industry.

By international standards, we have a large number of ATMs per capita (though not corrected for geographic size).

As at September 2017, there were 32 275 ATMs, only slightly below the peak of nearly 32 900 in December 2016. This represents over 1 300 ATMs per million inhabitant.

The share of the national ATM fleet owned by independent deployers has been rising over the past decade. Independent deployers operate standalone ATM networks that are not affiliated with any financial institution and which are often focused on convenience locations like petrol stations and licensed venues. They rely on the revenue generated by charging fees on all transactions, irrespective of the cardholder’s financial institution, to support their networks.

As at June 2017, 57 per cent of ATMs in Australia were independently owned, up from 55 per cent in mid 2015 and 49 per cent in 2010. The remaining 43 per cent were owned by financial institutions. The increase in the independent deployers’ share reflects strong growth in their ATMs, while the number of bank-owned ATMs has declined over the past few years.

A small number of ATMs that carry financial institutions’ branding but are owned and operated by an independent deployer are recorded in data for independent deployers; other similar arrangements may be recorded under financial institutions. (b) In late 2016, DC Payments acquired First Data’s Cashcard ATM business. (c) NAB, Cuscal and Bank of Queensland, along with a number of other smaller financial institutions, are part of the rediATM network, which allows customers of member institutions to access about 3 000 ATMs (as at June 2017) within that network on a fee-free basis. From August 2017, Suncorp also joined the rediATM network. (d) In November 2017, Stargroup was placed in administration after it was unable to complete a restructure of its debt.

There has been significant consolidation in the independent deployer market over recent years. Cardtronics, an independent deployer, had the largest fleet in Australia in June at nearly 10 500 ATMs, which is around one-third of all ATMs. Cardtronics is part of a US-based group that is also the largest deployer of ATMs globally. It entered the Australian market around the start of 2017 when it acquired DC Payments, which was the largest domestic independent deployer at the time. DC Payments had itself acquired a number of smaller independent networks over earlier years, including First Data’s Cashcard ATM business in late 2016. Other large independent deployers, such as Banktech and Next Payments, have also expanded their ATM fleets since 2015, partly through acquisitions.

Despite the increase in the share of independently owned ATMs, most Australian cardholders have had access to large networks of fee-free ATMs provided by their financial institutions. As at June 2017, three of the four major banks each had fleets of at least several thousand ATMs; NAB had the smallest fleet among the majors, but it is also part of the rediATM network, which means its customers had access to about 3 000 ATMs in that network on a fee-free basis.

A number of the banks, including all the majors, have recently removed the ATM withdrawal fees they used to charge non-customers. This means Australian cardholders can now generally access cash free of charge at around 11 000 financial institution ATMs across the country, which is a significant increase in access to fee-free ATM services.

However, following the removal of withdrawal fees by various banks, the distribution has changed significantly: there is now no charge for foreign withdrawals at around one-third of ATMs, whereas most of these ATMs had previously charged $2.00. But Independent deployer ATMs have the greatest variation in ATM fees; as at June this year, their withdrawal fees ranged from zero to $8.00, though most were around $2.50 to $3.00.

With the removal of withdrawal fees providing a much larger network of fee-free ATMs, it will now be even easier for cardholders to avoid paying fees. As a result, those ATM deployers that continue to charge withdrawal fees – particularly independent deployers, who typically charge the highest average fees – may face additional competitive pressure, especially where they have ATMs in close proximity to fee-free bank ATMs. That said, many independently owned ATMs are in convenience locations not serviced by bank ATMs (such as pubs and clubs) and so they may be shielded somewhat from this competitive pressure.

For those banks that eliminated their withdrawal fees, the direct reduction in their revenue will be relatively small, especially given the decline in ATM use over recent years. In particular, based on the Bank’s survey, it is estimated that withdrawal fees paid at ATMs owned by the major banks in 2016/17 totalled around $50 million. As noted earlier, the bulk of ATM fees has been paid at independent deployer ATMs rather than bank-owned ATMs.

Given that cardholders can now effectively use most bank ATMs on a fee-free basis, it is likely that having a large ATM fleet will be viewed as less of a source of competitive advantage to banks than it was in the past. With ATM use declining rapidly and the costs of ATM deployment continuing to rise, the removal of ATM fees may strengthen the case for deployers to reduce the size of their ATM fleets. Having multiple bank ATMs side-by-side or in close proximity (as can often be seen in shopping centres, for example) will make less economic sense now that all or most of those ATMs are fee-free.

Fleet rationalisation could occur in a number of ways. Some banks (and possibly independent deployers) might look to better optimise their own fleets by removing ATMs in low-density or low-use areas. Banks may look to pool part or all of their fleets with other banks under generically branded, shared service or ‘utility’ ATM models as a way to improve efficiency, while still maintaining adequate access for cardholders.

A pooled network may enable the participants to remove ATMs that are co-located or in close proximity, which would reduce costs and help them sustain, and possibly grow, their joint network coverage. Indeed, before the recent announcements on direct charges, some banks had been in discussions about pooling their ATM fleets into a shared utility.

Facing similar downward trends in cash and ATM use, a number of other countries, particularly in northern Europe, have successfully implemented or are considering shared ATM models. For example, bank ATMs in Finland were outsourced to a single operator in the mid 1990s, while Sweden’s five largest banks adopted a utility model earlier this decade. The large Dutch banks are currently looking to set up a joint ATM network to help ensure the continued wide availability of ATMs in the Netherlands even as cash use is decreasing.

While it is too early to assess the full impact of the recent announcements by the major banks, it is likely that they will focus attention on the growing disparity between the number of ATMs in Australia and the demand for ATM services.

Some consolidation seems likely, and may even be desirable for the efficiency and sustainability of the ATM network, though it will be important that adequate access to ATM services is maintained, particularly for people in remote or regional locations, where access to alternative banking services is often limited.



More On The Digital Banking Revolution and Fintech

We had great reactions to our earlier piece on the Digital Banking Revolution, and where Consumers fit in the Fintech Stack, following the release of our latest Quiet Revolution report.

Of particular interest was our Banking Digital Innovation Life Cycle analysis, as shown below, and includes a number of enhancements:

[Editors Note: Diagram above updated to include Distributed Ledger 27 Nov 17]

We have made a short video describing the approach, and discussing the elements in the diagram. We also highlight what we judge to be the top three most important innovations.

You can obtain a free copy of our Quiet Revolution report,”Time For Digital First“,  which includes our latest consumer research, and is discussed in the video.


Keep Me Posted calls on the industry to support the ban on paper fees

From KeepMePosted.

Are we finally heading towards the end of paper billing fees?

On Tuesday 21 November, Treasury launched the process that could see the end of paper billing fees for Australian consumers.

“There has been a significant shift away from paper billing in recent years,” Mr McCormack, Minister for Consumer Affairs, said. “Yet not every Australian consumer has the means to access digital billing and it is unfair to punish them for being unable to do so. Better outcomes and protections are needed for those consumers who do not have the option to transition to digital bills and who can least afford to be penalised.”

Keep Me Posted, which has been working tirelessly for the last 18 months to obtain legislative reform, worked with the Minister’s office in the lead up to the consultation and met with Treasury’s representatives on Thursday afternoon as part of the consultation process.

“We clearly stated Keep Me Posted’s position to support a total ban on all billing fees, which is option 2 of the consultation paper,” said Kellie Northwood, Executive Director, Keep Me Posted.

“We call on all Australians, industry stakeholders, interested groups and consumers to have their say and support the ban.”

Treasury’s consultation paper explores the costs and benefits of five (5) options, including the prohibition of paper fees, option 2. Keep Me Posted says it is the only option that can guarantee consumer protection against unfair and discriminatory charges.

Treasury is seeking submissions from consumers and consumer advocates, businesses and environmental groups. Individuals can leave an informal comment on the website or post a simple letter to Treasury.

According to Treasury’s estimates, the total annual cost of a ban would be between $80 and $93 million for the sixteen (16) Australian businesses with the largest customer base. As a comparison, it is expected that abolishing ATM fees, measure that was announced in September, will cost the big four banks $500 million a year. The relative cost to businesses doesn’t seem very high compared with the financial pressure that is put on vulnerable consumers.

Keep Me Posted doesn’t accept the idea that electronic bills are a ‘free’ option for consumers to receive their bills and statements. “When you opt-in to electronic bills and statements it means you need to possess and keep an electronic device, pay for an internet subscription or for mobile data, and more often than not you pay to print the bill at home,” commented Kellie Northwood.

According to the World Economic Forum’s Global Information Technology Report 2016, with a rank of 100 out of 139 countries for fixed broadband internet tariffs, Australia lags way behind in terms of internet affordability. More, the latest Deloitte report into mobile usage shows that 43% of smartphone owners regularly exceed their data allowance with a collective cost of $300 million a year in extra charges.

Further, the ACCC reported that Australians lost nearly $300 million to scams in 2016, $84 million in losses being reported to Scamwatch and nearly $216 million to ACORN and other scam disruption programs. The majority of these scams, 43%, were delivered by electronic means while only 4.1% came in the mail. In October, ACCC revealed that False billing is one of the top three (3) scams that Australians are most likely to encounter online.

Tim Hammond, Shadow Minister for Consumer Affairs and vocal supporter of the ban welcomed Treasury’s consultation paper and urged Australians who don’t want to pay extra to receive a bill by post to make a submission. Tim Hammond also criticised the Government for not tackling the issue sooner. Back in June, Tim Hammond moved a motion in Parliament to ask the Government to restore consumer protection. “We’ve got to restore the playing field for those who don’t have easy access online to make sure they are not getting stung for paper bills,” Tim commented.

“For Australians consumers, we really want the issue to be solved as soon as possible,” concluded Northwood. “It’s time for Government to apply a bit of good old fashioned common sense and make it clear to super profit companies that hidden or added costs along the way are not acceptable.”

Australians have until Friday 22nd December to make a submission.

Time For “Digital First” – The Quiet Revolution Report Vol 3 Released

Digital Finance Analytics has released the latest edition of our flagship channel preferences report – “The Quiet Revolution” Volume 3, now available free on request, using the form below.

This report contains the latest results from our household surveys with a focus on their use of banking channels, preferred devices and social media trends.

Our research shows that consumers have largely migrated into the digital world and have a strong expectation that existing banking services will be delivered via mobile devices and new enhanced services will be extended to them. Even “Digital Luddites”, the least willing to migrate are nevertheless finally moving into the digital domain. Now the gap between expectation and reality is larger than ever.

Looking across the transaction life cycle, from search, apply, transact and service; universally the desire by households to engage digitally is now so compelling that banks have no choice but to respond more completely.

We also identified a number of compelling new services which consumers indicated they were expecting to see, and players need to develop plans to move into these next generation banking offerings. Many centre around bots, smart agents and “Siri-Like” capabilities.

We have developed a mud-map to illustrate the journey of investment and disinvestment in banking. The DFA Banking Innovation Life Cycle, which is informed by our research, highlights the number of current assets and functions which are in the slope of decline, and those climbing the hill of innovation.  A number of current “fixtures” in the banking landscape will decline in importance, and in relatively short order.

We are now at a critical inflection point in the development of banking as digital now takes the lead.  Players must move from omni-channel towards digital first strategies, where the deployment of existing services via mobile is just the first stage in the development of new services, designed from the customers point of view and offering real value added capabilities. These must be delivered via mobile devices, and leverage the capabilities of social media, big data and advanced analytics.

This is certainly not a cost reduction exercise, although the reduction in branch footprint, which we already see as 10% of outlets have closed in the past 2 years, does offer the opportunity to reduce the running costs of the physical infrastructure. Significant investment will need to be made in new core capabilities, as well as the reengineering of existing back-end systems and processes. At the same time banks must deal with their “stranded costs”.

The biggest challenges in this migration are cultural and managerial. But the evidence is clear that customers are already way ahead of where most banks are in Australia today. This means there is early mover advantage, for those who handle the transition swiftly. It is time to get off the fence, and on the digital transformation fast track. Now, banking has to be rebuilt from the bottom up. Digitally.

Request the report [44 pages] using the form below. You should get confirmation your message was sent immediately and you will receive an email with the report attached after a short delay.

Note this will NOT automatically send you our research updates, for that register here. You can find details of our other research programmes here.

The first edition is still available, in which we discuss the digital branding of incumbents and challengers, using our thought experiment.

Volume 2 from 2016 is also available.

Broker Boom Outpaces Loan Growth – MFAA

According to the MFAA, the boom in brokers may be unsustainable, given lower mortgage growth.  The snapshot, up to March 2017, shows that the number of brokers is estimated to be 16,009, representing 1 broker for every 1,500 in the population.  Overall brokers rose 3.3% but net lending only 0.1%. As a result the average broker saw a fall in their gross annual income. On these numbers, brokers cost the industry more than $2 billion each year!

Around 53% of new loans come via brokers, they claim.

They call out a mismatch between the number of brokers and new loans settled, and other than in VIC, volumes are down relative to brokers.

Here is their release:

The latest Industry Intelligence Service (IIS) Report has revealed that finance brokers continue to facilitate more than one in two (53.6%) of all mortgages written in Australia.

“This is a strong performance in the context of investor and interest only prudential measures imposed by regulators during the period, however, there are some warning signs that we need to be taking note of,” said Mortgage & Finance Association of Australia (MFAA) CEO Mike Felton.

The IIS Report has revealed the number of finance brokers in Australia has grown by 3.3% to just over 16,000 (in the six-month period October 2016 to March 2017), with more than 500 new brokers joining the industry in the reporting period.

This exceeded the growth in the value of new home loan settlements by brokers nationally (up 0.1% at $94.61 billion) and the number of broker-originated new loan applications which fell 4.5% to 303,300.

“Whilst the improved broker coverage is positive for consumers, these statistics should be seen as grounds for caution and need to be closely monitored. It is not a sustainable trend to have broker numbers continually rising faster than the value of new business written and could be part of the reason why the report shows the average income for brokers is down 6% nationally. When the pie stays the same size and there’s more mouths to feed, the slices inevitably get smaller. The report reveals that, on average, the sum of a broker’s up-front and trail remuneration is $133,500 per annum, before costs, which is down from $142,500 in the previous report,” he said.

“The data shows that on a state level, only Victoria appears to have a clear alignment, or a reasonable equilibrium between the growth in broker numbers and growth in new lending,” he said.

The report also reveals that Australia’s finance brokers are gradually utilising the services of a more diverse range of lenders and diversifying the types of loans they are writing as well.

“This report is showing a shift in the broker use of loan products from majors and regionals aligned to majors to specialist lenders, international lenders and broker white label products,” Mr Felton said.

“Greater diversity is good news in that it strengthens the broker proposition and competition within the mortgage market,” Mr Felton said.

The MFAA’s Industry Intelligence Service (IIS) Report provides reliable, accurate and timely market intelligence for the mortgage broking sector. It is designed, produced and delivered by Comparator, a CoreLogic business and a recognised provider of performance benchmarking, market diagnostics and ad-hoc investigative services to the retail financial services sector in Australia and New Zealand.

ACCC and Fee Free ATM Services in Very Remote Areas

The ACCC has issued a draft determination proposing to grant re-authorisation to parties to provide fee free ATM services in very remote Indigenous communities for 10 years.

Under the arrangement, participating banks and ATM deployers provide fee-free ATM withdrawals and balance enquiries at up to 85 selected ATMs for customers of those banks. The ACCC previously authorised the arrangement in 2012 for five years, which expires in December.

“The arrangement co-ordinated by the Australian Bankers’ Association has resulted in significant public benefits over the past five years, which are likely to continue for the next ten years,” ACCC Commissioner Roger Featherston said.

People living in very remote Indigenous communities can often pay high levels of total ATM fees, due to frequent ATM usage and a lack of access to alternatives.

“High ATM usage and fees intensifies the financial and social disadvantage found in very remote communities. Enabling Indigenous people in these communities to have the same access to fee-free ATMs that other Australians enjoy in less remote parts of the country lessens this disadvantage,” Mr Featherston said.

The proposed conduct allows for additional banks and ATM deployers to be added to the arrangement.

The communities to benefit from this project are located across the Northern Territory, Queensland, South Australia and Western Australia. The full lists of ATM locations and participating banks are attached to the draft determination, available on the public register.

The ACCC is now seeking submissions on the draft determination by 16 November 2017 and expects to release its final determination in December 2017.

Brokers burned by customer-driven channel conflict

From The Adviser.

Home loan conversion rates are plummeting as borrowers attempt to secure a mortgage by making multiple applications across different channels, new research has found.

Data from Digital Finance Analytics (DFA) shows that in recent months, the number of mortgage applications which are made, but which do not lead to a funded loan, is on the rise.

Back in 2015, the ratio was around 80 per cent. Now it has dropped to around 50 per cent.

DFA principal Martin North said that the data, which is based on 52,000 Australian households, shows that more multiple applications are being made to a portfolio of lenders in an attempt to get a single approved loan.

“Essentially, they are backing both horses,” Mr North explained. “They are talking to brokers and potentially putting applications in via brokers but also putting applications in themselves.

“It is creating a lot of noise in the system. That means there is a much lower probability of an application a broker is handling translating into a funded loan.”

The analyst believes that a number of factors are contributing to the rise in multiple mortgage applications being made by the same client across different channels. The ease of applying for a mortgage online, driven by comparison websites and digital platforms that enable a DIY approach, is believed to be a major factor.

In addition, Mr North points out that consumers understand that credit has become tighter following the introduction of macro-prudential measures.

“They understand that the hurdles are higher now,” the principal said. “They don’t necessarily trust one channel over another, but they will try this portfolio approach and see what turns up. The fact that the processes are far simpler now than they used to be is making it easier.”

The DFA data shows that younger borrowers under the age of 40 are making multiple applications more than any other age groups. Mr North said that this is not surprising, given their digital literacy.

He believes that the findings shift the conversation about mortgage channels and pose significant challenges for banks and brokers.

“I bet nobody asks whether the borrower currently has a mortgage application in the system,” Mr North said. “Perhaps, that’s a questions banks and brokers need to start asking.”