Australia’s Commonwealth Bank announced that it will transition legacy account holders to the newer “Smart Access” account.
A USD 3 “assisted withdrawal fee” would then be assessed to migrated customers each time they took out cash over the phone, at a bank branch, or the post office. Politicians on both sides of the issue immediately demanded that the decision be reconsidered after the move caused a stir.
The Commonwealth Bank declared that it would put a six-month hold on the account changes for the “10%” of impacted people who it believed would suffer more due to the change. The dispute has brought attention to the struggle for justice to preserve cash and bank branches for the Australians who still depend on them.
Allowing the banks to impose additional fees on their own is politically unacceptable. A cash mandate for necessities and a potential new rural services levy to maintain branches are two of the government’s other proposals.
What are the alternatives, how might a levy operate, and why is it crucial to maintain cash access and bank branches, especially in the regions?
Losing access hurts the regions
In Australia, over 2,000 bank branches have closed since 2017, and rural areas have seen several losses. Foot traffic has decreased due to demographic shifts, population declines in rural areas, a shift to digital banking, and a continued decline in the use of cash.
Branches themselves require expensive upkeep. It is costly to transfer money across the nation, often prohibitively so for Australia’s more remote regions, on top of rent, wages, and security fees.
Closing a bank branch in a rural area can have a major negative social and economic impact on the community, making it less competitive with urban areas.
Vulnerable groups should be especially concerned because they might not have access to adequate internet or dependable transportation options. For small businesses, losing a local banking presence can have detrimental effects as well. If credit assessors in urban areas don’t comprehend the needs of rural businesses, credit access will be limited.
Some businesses that rely heavily on cash must have access to branches to manage their cash “float,” which is used for small expenses and change provisions. Businesses in industries like tourism or those situated in remote areas with erratic network access—which is necessary to run EFTPOS machines—also need dependable access to cash.
The Treasury reportedly considered imposing a new tax on Australian banks to support regional banking. According to the plan, each bank’s levy payment would be determined by how many regional branches and ATMs it operated concerning the amount of household deposits it held.
As one might anticipate, preliminary estimates published in the Australian Financial Review indicate that banks with extensive regional networks would benefit most from such a programme.
Bendigo and Adelaide Bank are among them. They are projected to receive roughly USD 200 million annually under the plan. NAB and Rabobank may also benefit financially because of their significant agribusiness presence.
ING and Macquarie, as well as Commonwealth and Westpac, are among the banks that would inevitably suffer the most from their online-only presence. These banks are estimated to be able to pay more than $60 million annually in individual levies. It might be more than $100 million for Westpac.
Could there be unintended consequences?
Some worries imposing a fine on banks that operate exclusively online could exacerbate the existing lack of competition in this sector.
Currently, the big four banks in Australia dominate more than 75% of the mortgage and deposit market.
Furthermore, there’s a potential consequence that these bank fees might be passed down to customers, leading to increased mortgage rates or decreased interest rates on deposits.
A study conducted on German banks in 2011 demonstrated that on average, regional banks increased their lending rates by approximately 0.14% in response to the levy. This is equivalent to more than half of the typical 0.25% shift in the RBA cash rate.
Lessons from around the world
Besides Australia, other countries also face difficulties associated with regional banking. Direct levies are not common. Access to banking in regional areas has been provided and maintained through several additional policies centred on regulatory mandates.
India has experimented with requiring branch networks to be maintained in rural and smaller towns.
According to the US Community Reinvestment Act, banks must serve local communities or risk having their growth ability restricted. In Canada and the United Kingdom, banks must provide alternatives, like mobile banking, and consult with communities before closing branches.
In South Africa, banks are rewarded with points under a formal framework for economic inclusion and empowerment, in addition to being required to provide services in remote areas.
The post office has been essential in providing basic banking services in several countries, much like Australia Post’s Bank@Post programme. Extending the Bank@Post programme, after consulting with communities, may be one of the best strategies to sustain regional banking.
Additionally, Australia Post may benefit from expanding banking services. By sending fewer letters, its branches are also experiencing a decrease in foot traffic. One potential structure for this kind of growth is the banking hub system in the United Kingdom, where large banks are part of a non-profit organisation and function through the Post Office.
Meanwhile, Commonwealth Bank announced a new travel booking service that more than 6 million eligible customers can use through the CommBank app to search, book, and pay for flights and hotels from hundreds of thousands of hotels and hundreds of airlines.
With millions of users already, the global online travel agency Hopper powers the new CommBank digital experience, which focuses on offering a variety of cutting-edge travel features.
According to the most recent CommBank iQ Cost of Living Insights Report, spending on travel experiences has increased. Spending increased by 4% over the previous year, driven by a 16% annual increase in spending on online travel reservations.
Customers most frequently set savings goals related to travel through the CommBank app. Consumers can lower their out-of-pocket travel expenses by using their CommBank Awards points to pay for their purchases using a credit card that accrues points.
For any hotel reservation, qualified CommBank Yello customers will receive 10% back in travel credits as part of a special Travel Booking launch offer.