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Ref: MG/SF/GG1001

31 March 2023

Committee Secretary
Senate Standing Committees on Rural and Regional Affairs and Transport
PO Box 6100
Parliament House CANBERRA ACT 2600

Email: rrat.sen@aph.gov.au

By Online: Lodge my submission – Parliament of Australia (aph.gov.au)

Dear Committee Secretary

AgForce is a peak organisation representing Queensland’s cane, cattle, grain and sheep, wool and goat producers. The cane, beef, broadacre cropping and sheep, wool and goat industries in Queensland generated around $10.4 billion in on-farm value of production in 2021-22. AgForce’s purpose is to advance sustainable agribusiness and strives to ensure the long-term growth, viability, competitiveness and profitability of these industries. Over 6,500 farmers, individuals and businesses provide support to AgForce through membership. Our members own and manage around 55 million hectares, or a third of the state’s land area. Queensland producers provide high-quality food and fibre to Australian and overseas consumers, contribute significantly to the social fabric of regional, rural and remote communities, as well as deliver stewardship of the state’s natural environment.

AgForce welcomes the opportunity to make a submission to the inquiry into bank closures in regional Australia.

The closure of banks in regional, rural and remote (RRR) communities is of great concern to affected AgForce members, with the depressing prospects of the associated negative impacts these branch closures have on RRR communities.

AgForce has received feedback from our membership to express concern about this issue and for this reason we have offered a set of recommendations to the inquiry, to support finding solutions to a difficult situation.
Indicative member comments and views on bank closures
•            Our members are keen to see local bank branches remain open while cash is circulating in regional areas, and the population demographic is representative of traditional banking needs.
•            It would be great to see the banks come together and divide the regional towns between them. each town had one remaining branch, rather than all the banks leave town. This way, people can still obtain a bank branch service.
•            The Australia Post arrangements only offer basic banking services. The services as they stand, are an inadequate substitute for a banking service for regional communities.
•            Bank@Post certainly is a great service, but still has its limitations in some small towns, as a lot of the small town, Australia Post offices are franchised (not a reflection on franchises, doing their best) and don’t always offer all the services and may only be open on certain days of the week.
•            The Post office is open Monday, Wednesday, Friday, which does not coincide with doctor’s days which are Tuesday and Thursday, so if you would like to do any banking matters while in town for a medical appointment you can’t and have do a separate trip in on another day. Also, if the power goes out which is happening quite regularly, the whole town shuts down, unless the business has a generator, they are unable to do any electronic transactions, Australia Post included.
•            Regional banking [should] be seen as a whole of bank benefit, rather than on individual branch profitability.
•            The loss of banking services in regional, rural and remote communities, negatively impacts regional development, growth and opportunities for business, farming, councils and community organisations.
•            Utilising government programs and bank education to move customers to the changing banking environment, does little to better the shortcomings of digital banking in regional areas, nor does it assist our dependant and aging bank customers adapt to digital banking.

RECOMMENDATIONS
AgForce supports the philosophy of a strategic call to action by the government to review the current banking system and legislate minimum bank service standards for regional communities, considering significant government supports/guarantees our banking sector.
AgForce makes the following 4 key recommendations:

Recommendation 1: Government legislation to support regional bank essential services.
We propose the following government-led legislative solutions to the banking system to maintain
“bank essential services” in RRR areas.

AgForce recommends that while cash exists in circulation (especially in regional areas as a necessity of distance and poor online connectivity), and banks continue to provide product services outside of transactional banking, and the age demographic warrants continuation of more traditional banking services, that the government legislate minimum requirements that support regional bank branches, access to cash and face to face banking services.
Currently 95% of Australians do not need to travel more than 4 kilometres to access cash, yet RRR community members often will have to travel vast distances to access bank essential services.
We recommend Government legislation to:
•            ensure the essential services of banks continue to financially connect regional communities, at a reasonable travel distance, similar to urban bank customers.
•            incentivise banking institutions to redirect funding to the regional branch banking model, as a priority over urban branch bank access.

•            incentivise smaller ADI institutions and reduced their compliance costs to assist them to offer banking services in regional areas.
•            The establishment of a better connectivity plan for rural and regional Australia.
  • ensure adequate connectivity and power supply to RRR areas, before a bank leaves town, and
  • an alternative to cash, before customers are solely reliant for upon digital bank services with poor connectivity.
  • Any banking plan should consider the government’s strategy: 5 elements of regional development.[1]
Recommendation 2: A shared banking service model solution.
Our preferred outcome is a move toward a shared banking services model (similar to that implemented in the UK). We recommend:
•            Australian banks adopt a similar program to the UK bank system, a “bank shared services model”, where the remaining bank would enable customers of other banks to complete transactions through that bank, and without extra fees or charges.
o            Government organisations responsible for overseeing banking in Australia review the geographical spread of authorised deposit-taking institutions (ADI’s) and ensure adequate regional coverage, as per recommendation 7, taskforce report 2022.[2]
o            the shared banking service model is based on the establishment of regional service zones, and service distances, with bank hubs, rural financial services and ATM access, which will ensure customers are not without (government declared) “essential services”. This arrangement would not be considered collusion because it would be recognised and transparently operating within a government reviewed framework.
o            the establishment of transfer certificates or transfer passports, so customers can easily and without cost or implication transfer banking to nearest branch. Recognising the 4 main banks have very similar products.
The shared banking services model ensures individuals continue to have access to banking and financial service products that banks have invested into for decades and still offer today. Such as, insurance products and renewals, term deposit rollovers, pension account advice, bank cheques for purchase of assets, deceased estates, etc. These are not always a practical or an available service offering online and further disadvantages the RRR population.

Recommendation 3: Bank@Post an alternative solution.
We recommend that where the “bank shared services model” does not achieve agreed support, the Government move regional banking toward the creation of the next pillar of banking, through an improved Bank@Post service model. That is the Bank@Post banking service be the alternative solution to the traditional regional bank branches.

We recommend:
  • Improve the Bank@Post banking services with ATM access, higher transaction limits, replacement cards or passbooks, bank cheque access, deposit transfers between accounts, deceased estates etc, before a community is completely left without bank or bank financial services.
  • A dedicated banking officer or community bank window at Bank@Post centres to deal with customer request anomalies or more complex enquiries across the banking product service range, including identification verification.
  • Bank@Post be adequately resourced to handle the workload, and provided greater responsibility to manage non-transactional banking activity, such as to witness bank documents,
  • Australia Post’s better equipped cash floats and increase deposits limits to sustain the needs of agribusinesses and community groups.
  • Ensure adequate and reliable connectivity and power supply to RRR areas, to support consistent Bank@Post banking services.
Recommendation 4: Customer focussed solutions to regional banking.
As a measure of last resort, outside our preferred top 4 outcomes, we propose the following customer service banking solutions for regional banking.
We recommend:
  • Impact statements consider whole of region loss of revenue, rather than cost to bank of maintaining individual branches and cash depositories.
  • A longer-term commitment by banks to the Bank@Post model of services beyond current 10- year plans.
  • Before banks leave town in favour of digital bank services, they should adequately resource (either phone, virtual, technical and other) enabling customers to have a complete suite of effective and reliable digital banking services solutions that begins with acceptance of identification verification, digital signatures and reasonable turnaround times, and will not require any face-to-face engagement.
BANK CLOSURES IN REGIONAL AUSTRALIA
Information in this section has been relied on in producing this submission and our recommendations and has been sourced from the indicated reference sources at the end of this submission.

Material information addressing the issue.
The Australian Government during COVID defined Australian Banks as an essential service.

The regional banking taskforce report noted the ‘perception that financial service providers occupy a
special position of responsibility and trust in their community’.

And as stated by Mr Miller (Westpac), “Access to banking services is critical to economic and social development”.
AgForce members are extremely concerned about the prospects of being left without “bank essential services” in regional areas and the impact this will have on their livelihoods, as they are forced on to inadequate digital banking platforms, only capable of completing 95% of the required digital transactions.

AgForce recognises closure of regional branches have been going on for some time now and likely to continue with the ongoing transformation to digital banking. Banks continuously invest in improving and securing the digital services they offer, in apparent preference to a physical branch presence.

Regardless of banks’ commitment in the past to regional banking or how poorly they engage with community or Local Councils on the decision to close branches, recently banks have sent a very clear message regarding their commitment to regional communities, as highlighted in the Senate inquiry; banks issued closure notices on 72 branches across RRR Australia, presumably prior to the regional banking taskforce final report enforcement, commencing July 2023.

We welcome Westpac’s announcement that they have decided to suspend the closure of the 8 branches they had indicated for closure until this Inquiry has been completed and the proposed actions can be considered. We also appreciate nab’s efforts in completing relevant impact statements. (RRAT Senate inquiry.2023)

Banking Trends, who are the bank customers?
We understand why banks are looking forward to newer service delivery models. The 2021 ABS census data shows generation Y (millennials) and generation Z now account for 40% of the Australia’s population and are trending upward. By 2030 this group will be greater than the combined interwar, baby boomers and generation X who were traditionally exposed to a cash-based society.

However, interwar, baby boomers and Generation X in 2030 will still account for more than 45% of the population. Despite the past benefits of growth and wealth these population groups have brought banks, they are about to leave this generation, (who may need additional transactional support) with only a virtual, digital bank reality. (Centre for Population. 2022)

Despite banks’ confirmed inability to manage all transaction digitally (see below), progress toward the removal of face-to-face customer bank service access continues. (RRAT Senate inquiry. 2023). This only compounds the disadvantages for older Australians without the required skills to manage their own finances digitally, and impacts negatively on businesses, farming, councils, and community groups, particularly geographically isolated ones.

Digital banking solutions to assist Australians to respond and adapt to new challenges and opportunities presented by social, economic, and technological change, will not suit all aging customers, nor will all customers be adaptable or capable to move to full digital banking, even if it was currently possible.

The regional banking taskforce final report confirms the importance of cash in regional communities, because of the size and distance between communities, and the limitations of digital banking. These factors include either isolated locations, poor connectivity, variable electrical power supply, limited types of bank service available, or inconvenience, such as doctors open on separate days to banks, or the identified limitations of Bank@Post service.

The taskforce report (2022) reaffirms regional communities need for cash and states, “…18 per cent of those living in regional areas being high cash users. The majority of high cash users indicated they would suffer a major inconvenience or genuine hardship if they could no longer withdraw cash or if retailers stopped accepting cash (Delaney et al. 2020)”.

While cash still exists in circulation (especially in RRR areas) as a means to transact, and banks continue to provide services other than transactional banking, such as, asset finance, insurance products, investments, term deposits, bank loans, etc, and the age demographic warrants continued provision of traditional banking services, support for regional bank branches and access to cash and face to face banking services should be maintained, including legislated if necessary.

Why is government intervention needed?
AgForce has concerns about the implications of statements made by bankers in the recent Senate inquiry, that “96% of transactions are completed digitally online”. And that “95% of cash transactions can be done at Australia Post, Bank@Post service”. While this is sounds positive, crucially it means 4% of transactions cannot be completed digitally and must be completed face to face, and 5% of transactions cannot be completed at Australia Post’s, Bank@Post service model.

The Bank@Post service identified limitations concern, access to cash (more than $1,000 per day), cash floats, ATM services, cash deposits greater than $35,000 in a week (which are limited to 5 separate
$7,000 transactions), bank cheques, replacement cards, transactions of other products; term deposits, insurance renewals, bank loans, or assistance with deceased estates.

While 95% of transactions can occur digitally in urban areas, of nab’s 87% of registered online banking customers, only 14% of those registered are active users. And 15% of customer rely solely on branch banking and use no other method.

The 4 pillars of banks now consider themselves as distribution businesses only, so where is the bank service model for customers to access cash for day-to-day living, in RRR areas?

The banks still want access to people's money while they're simultaneously reducing depositors and borrowers' access to face to face banking services in RRR areas. (RRAT Senate inquiry. 2023).

The facts are high levels of interactions about lending arrangements are still face to face, albeit some via video and phone, (consequent to a shift of banking style since COVID), though recent studies showing a trend back to face-to-face meetings as a preference.

This may be the time for a government review of our current banking system, the role of banks as essential service providers in our decentralised society and what RRR bank customer needs will be into the future, rather than pushing a digital only or predominant banking model, despite cash still being widely use in the RRR areas.

In Summary
AgForce welcomes the opportunity to contribute to the Rural and Regional Affairs and Transport Reference Committee inquiry. Our members have expressed their concerns regarding regional bank closures, and the negative impact these closures will have on RRR farming communities.

We propose the following series of recommendations to improve the current banking system and legislate minimum service standards for RRR communities.

We have made 4 key recommendations:
Recommendation 1: Government legislation to support regional “bank essential services”.

Recommendation 2: A shared banking service model solution.

Recommendation 3: Bank@Post an alternative solution.

Recommendation 4: Customer focussed solutions to regional banking.

AgForce thanks the Rural and Regional Affairs and Transport Reference Committee for the opportunity to contribute to this inquiry. If you have any questions or require further information regarding this matter, please contact Sam Forzisi, AgForce Policy Director, by email (forzisi@agforceqld.org.au) or mobile (0499 960 006).

Yours faithfully

Michael Guerin
Chief Executive Officer
 
Reference Sources:
ABS (2021). Online. Population: Census, 2021 | Australian Bureau of Statistics (abs.gov.au)

ABS (2021). Online. 2021 Census shows Millennials overtaking Boomers | Australian Bureau of Statistics (abs.gov.au)

Australian Government (2022). Online National, state and territory population overview | Centre for Population

Parliament of Australia. Online. 5. Elements of Regional Development – Parliament of Australia (aph.gov.au)

Regional Banking Taskforce Final Report (2022):  Regional Banking Taskforce - Final Report (treasury.gov.au)

APH (2023). RRAT Senate inquiry. ParlInfo - Rural and Regional Affairs and Transport References Committee : 02/03/2023 : Bank closures in regional Australia (aph.gov.au)
 
 
[1] 5 Elements of Regional Development
 
[2] Regional Banking Taskforce Final Report (2022).