Tag: COBA

Customer owned banking sector welcomes reports of the ACCC’s request for banking competition inquiry

Australia’s customer owned banking sector welcomes reports that the Australian Competition and Consumer Commission (ACCC) is requesting to conduct an inquiry into the banking industry’s competitiveness.

Customer Owned Banking Association CEO Michael Lawrence says the request from the ACCC and the comments from Tim Wilson MP were encouraging for credit unions, building societies and mutual banks who have been leading the charge for a more competitive retail banking market.

“The enduring solution to concerns about the banking market is action to promote competition.

“We don’t have sustainable banking competition at the moment. A lack of competition can contribute to inappropriate conduct by firms, and insufficient choice, limited access and poor-quality products for consumers.

 “We strongly support the ACCC’s calls for an inquiry to examine the banking industry’s competitiveness. It’s encouraging to see that the ACCC and Tim Wilson MP share our sector’s concerns about competition and what an uncompetitive banking market means for consumers.

“Last year’s Productivity Commission’s report on competition in banking sent strong messages to regulators and policymakers that regulation is hurting competition and consumers are paying the price.

“The regulatory framework over time has entrenched the dominant position of the largest banks.

“The PC report shone a light on a problem that is not well enough recognised – that more and more regulation can be harmful to consumers because it weakens competition.

“The Productivity Commission found that competition drives innovation and overall value for customers.  “The Financial Services Royal Commission looked into misconduct, now is the time to look into competition.”

COBA CEOs remind MPs, don’t lose sight of competition

More than 30 CEOs and Directors from customer owned banking institutions will arrive in Canberra today to remind Members of Parliament to keep competition in mind as the Financial Services Royal Commission recommendations are implemented.

The leaders of Australia’s customer owned banking institutions and the Customer Owned Banking Association will urge MPs to adopt the principles of proportionate regulation and invest in more ways to boost competition in the retail banking market.

Customer Owned Banking Association CEO Michael Lawrence said that customer owned banking institutions are key to improving competition in the retail banking market but need to be given the opportunity to compete fairly.

“The message is clear, greater competition leads to greater customer outcomes. Government must keep competition front of mind if consumers are to receive a better outcome from their banking.

“Without robust competition consumers are the ones who lose out. If there isn’t fear that your customers will up and leave you, there is very little incentive for banks to do what is best for customers.

“The customer owned banking model is the customer focused alternative to the investor owned model. Our CEOs are here to remind MPs that for more than 150 years, our sector has been trusted by Australians to look after their banking and financial well-being.”

Mr Lawrence said customer owned banking institutions aren’t asking to be regulated differently; but in proportion to the size, scale and complexity of their organisation.

“Using the one size fits all approach for all authorised deposit taking institutions with no consideration of the size or complexity of the organisation has serious consequences.

“The cost of compliance for a smaller institution may outweigh the benefits of the regulation, leading to stifled innovation and reduced investment in the community.”

While a more pro-competitive mindset is important, Mr Lawrence said customer owned banking institutions encourage government to do more to make it easier for consumers to switch banks. “There is a role for Government to play to help make it easier for consumers to switch. Creating a task force of Treasury, ACCC, ASIC, industry and consumer groups to investigate the barriers to switching is a good start.”

Customer owned banking institutions become Australia Post’s latest target

Australia’s customer owned banking institutions are being pressured to agree to an unfair pricing policy by Australia Post as it targets smaller institutions to pay excessive charges for access to Bank@Post, according to a COBA press release.

Despite Australia Post CEO Christine Holgate publicly ruling out applying a Community Representation Fee (CRF) to smaller banking institutions in front of a Senate Estimates Committee in October last year, customer owned banking institutions are being pressured to agree to colossal new fees.

Under Australia Post’s scheme, mutual banks and credit unions will be forced to either pay a tremendously exorbitant CRF or their customers will no longer be able to do their banking via Bank@Post.

The fees are so significant and disproportionate that in some cases they equate to almost 80 per cent of annual profit. This is compared to approximately 0.2 per cent for the ‘Big Four’ banks.

Customer owned banking institutions were initially given a handful of weeks to make a decision, however Australia Post has committed to a two-month extension. The extension is a welcome concession after the ‘Big Four’ banks received nine months to review and consider three different proposals.

Australia Post’s tactics are expected to primarily impact older Australians, particularly in rural and regional areas. For one member, 70 per cent of its customers that transacted via Bank@Post for the 2018 calendar year were 50 years of age or over. Of that group 66% were over 60 years of age.

CEO of the Customer Owned Banking Association Mike Lawrence said members were willing to pay their fair share but shouldn’t be picking up the tab for the ‘Big Four’s’ branch closures.

“The way Australia Post has engaged with customer owned banking institutions is certainly surprising from an organisation that the CEO claims is Australia’s most trusted brand.

“Customer owned banking institutions are happy to pay their fair share for a service, but should not be forced to cover costs created by the ‘Big Four’ banks. 

“The major banks are responsible for the vast majority of branch closures, 85 per cent of Bank@Post transaction volumes and bank most of the small business clients that rely on large cash floats.

“It should fall to them, not smaller banking institutions that primarily use Bank@Post for retail consumers, to make up the cost short-fall.

“After failing to get all of the ‘Big Four’ to sign onto the new pricing model Australia Post has put the pressure on smaller customer owned banking institutions to cover fees that are being generated by the ‘Big Four’.”

Mr Lawrence said COBA members were urging the Government to intervene to protect consumers in regional areas and maintain competition in the banking sector.

“This behaviour will have an enormous impact on Australians in regional and rural areas. If smaller institutions are forced to withdraw, customers will be forced to travel long distances to do their banking, or where that isn’t an option, have to switch banks.

“If the Financial Services Royal Commission taught us anything, its that customers need and deserve access to trusted banking alternatives.

“We’re hoping the Government can use its shareholding in Australia Post to stop the postal service from eroding competition in the banking sector.

“It’s clear that Australia Post has forgotten its role is to meet the needs of Australian communities. Hopefully the Government can remind it of its purpose.” Customers of customer owned banking institutions have been urged to write to Australia Post CEO Christine Holgate and Communications Minister Mitch Fifield to demand a fairer pricing system by visiting: fairbankingaustralia.com.au

COBA Convention: Samuel sees opportunity for customer owned sector

Former ACCC chair Graeme Samuel says the revelations of the Financial Services Royal Commission pose an opportunity for the customer owned banking sector.

Professor Samuel has told the COBA 2018 Convention in Melbourne today that the customer owned banking sector is “in a pretty good place.”

“The major banks have a major repair job ahead of them to restore trust in their approach to their customers,” Professor Samuel said.

“They all are now loudly proclaiming that they have been remiss in not putting their customers first. They are all promising to do so henceforth. But will they walk the walk? Will their institutional shareholders permit them to deviate from their perception of their primary remit – to increase the wealth of shareholders? How long will the shocking revelations of the Royal Commission remain at the forefront of their strategies for governance and cultural change?

“The customer owned banking sector has different drivers – and thus a different foundation on which to base their culture. And if they take advantage of the opprobrium currently attached to the major banks, and structure their conduct around the ‘should we do it’ culture, they have a lot to gain from current events.

“For they have the flexibility and motivation to not just talk about placing the customer first, but to actually walk the walk,” Professor Samuel said.

COBA CEO Michael Lawrence welcomed Professor Samuel’s comments.

“We strongly support Professor Samuel’s observation that it is the power of competition that will ultimately be the most powerful tool to bring about the changes in culture that the Hayne Commission is clearly demonstrating as an urgent priority,” Lawrence said.

The customer owned banking sector has four million customers and total assets of $113 billion.

Australians Ready to Switch – COBA

COBA says that new research has found the Banking Royal Commission has made Australians more receptive to banking alternatives and switching their banking.

An Essential Media poll, commissioned by the Customer Owned Banking Association, found 1 in 3 people are more likely to consider switching their banking institution.

 

The poll also found 8% say they have already changed their provider. A further 17% say the Royal Commission has led them to consider changing, but they haven’t yet, while an additional 18% are not sure if they will consider changing.

“These findings back up the increase in interest from Australians looking to enjoy the benefits of customer owned banking,” COBA CEO Michael Lawrence said.

“The feedback we’re getting is that there is great interest in a model that puts customers first, where 100% of profits are used to benefit customers.

“The poll shows people are ready to switch to an alternative where customer interests are not in conflict with shareholder interests.

“The ‘Own Your Banking‘ campaign we launched this week is a response to encouraging support we have already seen for mutual banks, credit unions and building societies. We are particularly keen to target our campaign toward the Australians who are considering changing and those undecided.”

Customer owned banking institutions are already seeing this trend.

As Greater Bank CEO Scott Morgan says: “Customer focus is more than just one of the values of Greater Bank, it’s the foundation on which the Bank was established and an important aspect customers are increasingly looking for. Recently we have enjoyed the benefits of this focus with the Bank experiencing some of the highest levels of customer growth we have seen in many years.”

“We are encouraged by positive consumer sentiment towards the customer owned alternative,” COBA CEO Michael Lawrence said.

COBA Launches New Campaign

A new campaign is encouraging Australians to ’Own Your Banking’ and to look at the benefits of customer owned banking. It includes a range of digital advertising, designed to highlight the benefits of Customer Owned Banks. We highlighted the opportunity for COBA aligned organisations in our recent post.

The Customer Owned Banking Association launched the campaign today following increased interest and demand from customers for banking they can trust.

“Own Your Banking is a direct response to our members telling us they’ve seen an uptick in customer interest and enquiries because people are shocked by stories they’ve been hearing in the Royal Commission,” COBA CEO Michael Lawrence said.

“Our model is the only alternative that can claim it is solely customer focused because 100% of profits are used to benefit customers. This is what we’re communicating through the ‘Own your Banking’ campaign.

“4 million Australians already own their banking – they are customers of mutual banks, credit unions and building societies across Australia.

“We hope ‘Own Your Banking’ will let consumers know there are plenty of alternatives in the Australian banking market that can be trusted to put them first.

“There are more than 70 mutual banks, credit unions and building societies located across Australia. We are market leaders in customer satisfaction and offer award winning home loans and low rate credit cards.

“We encourage consumers to take a look at our campaign and learn more about how to Own Your Banking.”

Customer owned banking for the people

COBA today said Australians looking for banking that focuses on them as people should look no further than Customer Owned Banking.

You might like to watch my recent discussions at their forum in Sydney.

Commenting on the Greens calling for a bank owned by the Government and RBA run, COBA CEO Michael Lawrence said:

“If Australians want banking that’s truly focused on people, that model has been operating in Australia for more than 70 years.

“More than 70 customer-owned banks, credit unions and building societies across Australia put their customers as their number one priority.

“The customer owned banking sector is profitable, has more than $111 billion in assets and a strong presence across Australia.

“We’re focused on delivering for the 4 million Australians and local communities we already serve and expanding beyond that.

“Customer owned banking has featured in the considerations of the Productivity Commission (PC) and a range of pro-competition announcements by the Federal Government.

“It’s positive that there are ideas to make the banking market more competitive.

“The current PC Inquiry into competition in financial services is an important investigation into the steps that need to be taken to spark better outcomes for consumers.

“Our submission in response to the PC Draft Report outlines some of the steps COBA would like to see taken.

“We look forward to seeing the detail of the Greens’ proposal and consulting our members about the proposal.”

COBA and the Future Of Banking

I had the opportunity to participate in the Customer Owned Banking Association conference yesterday.  I hold the view the these smaller, but more customer aligned financial services organisation are Australia’s best kept secret.  In fact, often they offer better rates, and a distinctive set of cultural values. But they need to drive a different path to the majors, when the economics of their businesses are stressed.

The current environment with the more than 20 inquiries including the Royal Commission and the higher funding costs as represented by the 20 basis point spread growth in the A$ Bill/OIS raises a whole set of questions. Plus the FED is predicting a further 8 rate hikes in the USA over the next couple of years, taking the US rate well above 3%! That will impact here.

I made a video blog of my visit to Sydney, and included extracts from a live radio interview I did for 6PR on interest rates, and my comments from a panel discussion regarding the future of banking.

 

 

 

COBA Welcomes Bipartisan Approach to BEAR

COBA has welcomed the bipartisan approach taken in Federal Parliament to give small and medium banking institutions more time to prepare for the Banking Executive Accountability Regime (BEAR).

Amendments to the Bill moved by the Opposition in the House were supported by the Government and the amended Bill has now passed the Senate. Small and medium banking institutions have until 1 July 2019 to prepare for the BEAR. It will commence for the major banks on 1 July 2018.

“It’s very pleasing that the Government and the Opposition recognise the importance of customer owned banking and the vital role it plays in delivering diversity and competition in retail banking,” COBA CEO Michael Lawrence said.

“To promote a more competitive banking market, it is critically important to minimise regulatory costs on smaller banking institutions.

“Customers ultimately bear the cost of regulatory compliance.

“MPs have also recognised that the regulatory compliance burden is effectively a competitive advantage for the major banks. This is because major banks have vastly greater resources than their smaller competitors to quickly respond to new regulatory obligations.

“More time for small and medium banking institutions to prepare for the BEAR in an orderly way will reduce the cost burden that would otherwise apply.

“I congratulate the Government and the Opposition on this outcome.”

COBA welcomes Government move on credit reporting

COBA says consumers stand to benefit from the Turnbull Government’s decision to nudge major banks to participate in comprehensive credit reporting (CCR).

“COBA welcomes Treasurer Scott Morrison’s announcement of a CCR regime from 1 July next year, starting with the four major banks,” said COBA Acting CEO Dominic Dunn.

“As the Treasurer notes, other lenders are likely to follow suit quickly to improve their competitive position and their credit decision making.

“COBA’s position is that participation in CCR should be voluntary for smaller lenders because they have more of an incentive to participate than the largest lenders and should be able to do so according to their own priorities and resources.

“The landmark Financial System Inquiry (FSI) report in 2014 found that the net benefits of participating will differ between different classes of credit provider. For a major institution with a relatively large customer base, early participation may provide, at least initially, relatively larger benefits to smaller participants than for the institution itself.

“But as participation and system-wide data grow, net benefits increase for all CCR participants.

“CCR has the potential to increase competition because lenders will have more information about consumers, which means they will be able to better match credit types and amounts to borrower capacity. Lenders will have capacity to more accurately price credit relative to the risk profile of the borrower.

“The banking market is an oligopoly and regulatory interventions must be designed to give the competitive fringe of smaller players every chance to take on the major banks.

“The Treasurer’s announcement on CCR is consistent with this approach. Regulatory compliance costs have a big impact on the competitive capacity of smaller players.”