The Future is Digital Says Westpac CEO

Your future is digital and Westpac’s is even higher profits. Once again, the commercial in confidence excuse was trotted out around disclosure of the cost of the Australia Post community representation contracts that are allowing the banks to close many of their regional branches. In 2018 the amount was public information so what’s changed? Westpac has taken the question on notice.

Almost a quarter of Australians cannot do digital banking. Either they lack access or the necessary skills to go online for their banking. I asked Westpac why the bank is turning its back on these Australians. The way Westpac’s CEO Peter King views this is that 96% of their own customers are engaging with them digitally so all is well.

Has Westpac looked at the fact they’re pushing people online who don’t actually have the capability to stay safe and secure on that platform? Instead of directly answering my question, Peter King said the three biggest scam losses are through investment scams, romance scams and business email compromises. Banks are doing everything they can, he said, to prevent this by blocking suspicious payments and educating customers.

Westpac is enthusiastic in its push towards digital. In Townsville for example, where Westpac has shut its doors, the bank conducted education sessions to help customers adapt to the digital transition. Clearly there are factors that limit digital banking in regional Australia. Westpac’s answer isn’t to reverse the closures, it’s to improve its banking app to do everything. The bank intends to shoehorn people into the digital economy whether they like it or not. Peter King believes this shift is much broader than just banking because all government and essential services will become digital too.

Will there still be cash? Peter King thinks that cash will still exist in the economy but its use will decline. Cash made up 70% of all transactions in 2007. That figure is now 13% and trending down. Where telecommunications or power are cut off, Westpac would get cash into an affected area by flying it in. Telecommunications is obviously critical.

Finally, I asked if Westpac’s data might not be accurate. It isn’t capturing all cash transactions. Once cash is circulating there is no way to track it, so perhaps they’re not seeing the real picture of cash use in the economy. I was told the Reserve Bank undertakes surveys into how cash is used and in Westpac’s view there is less call for cash making it less important in the scheme of things. Online banking and Bank@Post will replace bank branches, particularly in regional areas where Westpac and the other big banks are pulling away from in person services.

Profits over personal touch is what’s in store for customers in the digital economic future. In a move we’re seeing across the corporate and political sectors, the Big Four are making the data fit the narrative so they can achieve their goals. Where’s the care factor?

Transcript

Senator ROBERTS: Just sticking briefly with Australia Post, how much do you pay Australia Post for a community representation fee, not the transaction fee?

Mr King: It’s subject to some commerciality requirements. I’ve said it will be over $200 million over 10 years, including the fee. We might see whether we can provide that separately in confidence.

Senator ROBERTS: It wasn’t commercial-in-confidence in 2018. Is something being hidden?

Mr King: No. We’ll work with Australia Post on how much detail we can give you.

Senator ROBERTS: So, you’ll take that on notice?

Mr King: Yes.

Senator ROBERTS: Your submission relies on digital technology as a fallback to the removal of physical branches, yet 23.6 per cent, almost a quarter of the population, either lack access to or the ability to handle digital banking. Why are you turning your back on almost a quarter of the population? Do they not have enough money to warrant your attention?

Mr King: What we see in our customer base is 96 per cent of customers are engaging with us digitally, in terms of transactions.

Senator ROBERTS: That’s your customer base. I asked about the population of Australia. Almost a quarter don’t.

Mr King: In terms of our service offering, if you take the cash, we have our own branch network, and the Australia Post, and an ATM arrangement. So, there are plenty of opportunities for customers who still want to use cash to get cash through the country.

Senator ROBERTS: The ACCC reports that Australians lost $3 billion in online scams in 2022. Has Westpac done any work on what share of that has come from Westpac and the banking sector in general, forcing this 23.6 per cent of the population online when they lack the skills to avoid being scammed? Is Westpac simply setting up these people to lose their money in an online scam?

Mr King: In short, no. There are three big drivers of scam losses, and the biggest one by a long way is investment scams. As to investment scams, we have less financial planners in the country, more people doing
research, including on social media platforms, and that’s devastating. Romance scams are still pretty high in terms of people being prepared to pay for romance scams, and then there’s business email compromises. A lot of those are issues around how customers are being tricked out of their money, effectively. The way the banks are reacting is to do everything we can to help customers make better decisions. So, prompt them about those types of things, put friction in the system to stop the payments. But we do need to help our customers pick these scams up as well.

Senator ROBERTS: In towns where you close your branch and provide education to customers on how to use online banking safely, do you open a digital education centre?

Mr Miller: In a regional town where we’re closing a branch we have a fairly lengthy period where we’re consulting with our customers. We run education sessions from the branch before it closes. When the branch has
closed, we’ve enabled our call centres to be able to take calls from customers anywhere in Australia where they can continue that digital education with customers online. We would have had 340,000 of those conversations with customers since March this year.

Senator ROBERTS: Some of them are a physical, face-to-face in town where the bank is about to close?

Mr Miller: Absolutely. That’s our priority during the transition period.

Senator ROBERTS: What factors would limit digital banking in regional Australia?

Mr King: For us, I think we’re looking to have everything you can do in the bank in the app. We’re not there yet, as Ross said, but we will be. Another is, as you just said, helping people transition to the digital economy. But I think it’s broader than banking. If I look at government services, banking services and most services in the country, they’re all going to go digital, so we have to help people get on. Then telecommunications is critical as well.

Senator ROBERTS: Are you saying there will be no cash, none of this stuff?

Mr King: No.

Senator ROBERTS: You said ‘all digital’?

Mr King: I believe there will still be cash in the economy but the usage will go down. I think I used a stat before that, in 2007, 70 per cent of consumer transactions were cash based. It’s now 13 per cent and it will go
further down; that is the trend. Cash will be less important in the scheme of things than it has been historically.

Senator ROBERTS: What are customers supposed to do if the bank or the NBN or the telco fails for a whole day? I noticed in Mount Isa, the day before I arrived recently there was no internet and no EFTPOS so people had to use cash. Business was open purely because of cash.

Mr King: That is an important part, but also the merchant terminals can go into a mode which is called offline for a period of time, but you need your card. You need to put your physical card in. It’s hard to use a digital wallet in that situation. There are fallback facilities when telecommunications are down. It’s a bit harder when the power is down, obviously. In that case, like we do in any event, a flood or fire, we would get cash into the area and a way to distribute it. We did that in Lismore through the floods by flying it in.

Senator ROBERTS: If a constituent of mine goes to a farmers market and pays cash, how is that captured in the data for cash use and electronic payment?

Mr King: It will depend on how that merchant reports. Certainly, when we’re tracking cash usage we’re looking at money going in and out of the banks. It will depend on how that person banks, whether they go near a
bank at all. They might just spend it. The Reserve Bank has the data on how much cash is on issue, and then it touches the bank at certain points but we don’t see 100 per cent of it because some of it’s in the economy and going around without us seeing it.

Senator ROBERTS: That’s exactly the point, isn’t it? The data does not capture all of the cash transactions?

Mr King: If it doesn’t go through us we won’t see it; that’s right.

Senator ROBERTS: Correct. Could the volume of cash transactions occurring outside of the banking sector be quite different to the data you present as being the reduction in cash transactions?

Mr King: Possibly, but the Reserve Bank also does periodic surveys where they survey consumers on how they’re using cash. That doesn’t rely on the reported data. You also get surveys. Our experience in what we’re
seeing is there is less cash being used for transactions, and much more cards and particularly debit cards are being used for transactions.

Senator ROBERTS: I’m being sent complaints about queueing in the branches that remain after closures in the area. Your point of presence is now inadequate. If a customer wants to use face-to-face and their branch is
closed, then they go to the next nearest branch which is queued out the door so they give up and go home and use phone or internet or banking, would you consider your bank as being helpful?

Mr King: As I started with, customer service has to improve. If there are examples from your constituents, send them through and we’ll have a look.