To rail against the demise of branches ignores how people are accessing banks is dramatically changing.
Judo Bank Economic Advisor Warren Hogan says job vacancies and advertising is still “extraordinarily high” in Australia. “I think we’ve still got this backdrop of a resilient, solid economy that is still looking for workers,” he told Sky News Australia.
Bendigo pioneered the community banking model that allowed it to cheaply expand its national footprint from its Victorian base and in the process getting access to billions in low cost deposits, well beyond what would have been the reach of a small bank.
But now it is clear that branch banking is approaching its use by date, with most services as far away as your mobile phone.
Bendigo Bank has used its Community Bank to rapidly expand. Picture: Michaela Meade
A Senate committee examining hundreds of bank branch closures across regional Australia, was certainly born out of frustration, but has been short on solutions apart from the cash-strapped Australia Post being paid by by the majors and even regional banks to offer basic banking services.
In the era where cash can be transferred cheaply and instantly from wherever you are, bank branches are starting to feel like personal cheques.
It’s a frustration to be sure and unless banks are slapped with a universal service obligation that comes at a high cost to either taxpayers, shareholders or customers, closures of lightly used bank branches will continue. The biggest impact will be on small businesses in regional areas that still have to carry cash but most personal customers barely walk into a branch.
Telstra is paid more than $230m annually under a universal service guarantee that all Australian homes and businesses can have access to both broadband and voice services, regardless of their location. This is topped up by the $380m mobile black spot program.
All the major banks had been quietly closing branches in both the cities and regional Australia before Covid-19 hit, but the pandemic sped up the process, with banks given more flexibility to reduce hours open.
Westpac is now in the process of combining 100 of its St George and Bank of Melbourne branded branches with its Westpac branch to help it achieve company-wide savings targets. Westpac’s own technology shortfalls had been the reason this hadn’t happened earlier, but now getting all customers on the same banking platform.
In the last financial year, Bendigo closed 19 branches, the majority of these were community branches.
To give a sense of how Community Bank branches have underpinned Bendigo’s physical expansion of around 430 branches, Bendigo operates today Community Bank branches represent 300 of this. Around half of Bendigo’s branch footprint is in regional and remote areas.
Most retail banking today happens outside of the branch.
Under the model, the local community funds the cost of establishing the branch and staff and Bendigo provides the underlying infrastructure. Revenue from the branch is split between the bank and the branch shareholders.
Appearing at the regional affairs Senate committee where hearings were being held in Ingham, Queensland, Bendigo’s consumer banking boss Richard Fennell said his bank remains committed to regional Australia, but it was clear how banking was being used was changing. Some branches were “seldemly” used,
“The cost of maintaining a significant bricks and mortar presence is substantial. And for this reason, we often need to assess the viability of our branches,” he told the committee.
“The bank’s distribution strategy remains commercially driven by our customers’ needs and preferences. When these change, so must our approach to delivering our banking services,”
“Whether we like it or not, the clear and growing preference of the vast majority of our customers is to transact online. And we must be able to respond to those needs with competitive digital offerings”.
“As a result, we must adapt and adjust our strategy to suit the changing times. This includes making the necessary investments in technology that supports our online offerings and protects our customers using digital services”.
Bendigo is making strides on this front. Its online-only neobank Up is less than four years old and so far has gained more than 600,000 customers. This two-thirds of the entire customer numbers of the 25-year-old Community Bank network. It is arguable that some of Bendigo’s younger customers are signing on to Up versus the local Bendigo branch.
Suncorp says 80 per cent of new accounts are opened online. Picture: AFP
Suncorp Bank chief executive Clive van Horen says digital adoption has seen significant changes in the way customers engage with banks. Even five years ago, customers had to either phone Suncorp or walk into a branch to open a bank account. Currently, over 80 per cent of Suncorp’s accounts are opened online. At the same time, 75 per cent of the home loans sold by Suncorp are arranged through a mortgage broker, allowing the regional lender to access markets where it doesn’t have a physical presence.
Also appearing at the committee hearing in Ingham, Van Horen offered some sobering figures. Of the 16 bank branches Suncorp closed in regional Australia in the last five years, the average number of customers visiting those branches had dropped to only 41 per day. In four of those branches, there were only 10 customers per day coming through the doors. Suncorp has more than 360,000 people using its
“We have to balance where we invest across our branch network, our call centres, mobile and digital platforms as well as our ability to continue fighting fraud and cyber crime while staying competitive with larger banks when it comes to innovation and addressing regulatory change”.