Google Scares Aussie Banks

mask.of.sanity writes "Google could be the biggest threat to Australia's big four banks because of the trust online users place in it and its ability to engage with customers, banking executives say. They told an audience from the finance sector that companies like Google and PayPal are more responsive and trusted than banks, and cited emerging technology with an emphasis on online applications as a means for the smaller credit unions to challenge the position of incumbent banks. It's welcome news for Australia's credit unions: the nation's banks have taken turns in being the first to lift interest rates above the official reserve bank rate, with others collectively following suit, leading some to speculate they are in collusion."

Comments

"Responsive and trusted"

[mr_mischief]

Perhaps there's some cause and effect going on there. Companies that are more responsive to customer demands and concerns are, in my experience, more trusted by the customers. Perhaps the banks have already figured out how to compete and just don't realize it yet because being competitive cuts into profit margins.

Re:"Responsive and trusted"

[Nursie]

Yeah, I'm about ready to jump ship at the moment. I applied for a credit card with ANZ a week and a half ago. They tried to call me the next day and I missed it. Since then I try to call back every day or two, to find out what they wanted, but every time I get put on hold and I'm afraid my patience runs out after 15 minutes of that. I've been to the local branch too, but all they can do is phone the credit card folks and wait on hold with me.

I don't actually need your credit card enough for me to put up with that nonsense, thanks.

Re:"Responsive and trusted"

[Barefoot Monkey]

Perhaps there's some cause and effect going on there. Companies that are more responsive to customer demands and concerns are, in my experience, more trusted by the customers. Perhaps the banks have already figured out how to compete and just don't realize it yet because being competitive cuts into profit margins.

Being uncompetitive is far more profitable until competition comes and ruins everything.

Re:"Responsive and trusted"

[Anonymous Coward]

Perhaps there's some cause and effect going on there. Companies that are more responsive to customer demands and concerns are, in my experience, more trusted by the customers. Perhaps the banks have already figured out how to compete and just don't realize it yet because being competitive cuts into profit margins.

You have to wonder just how bad these Australian banks are when PayPal is "more responsive and trusted".

PAYPAL?!?!?! "more responsive and trusted"!!?!?!

Is dealing with these banks like handing your money over to the first meth fiend you can find laying in a ditch?

Re:"Responsive and trusted"

[Charliemopps]

Come to the USA! It's so easy here it doesn't even have to be you that signs up for it. Half the time it's someone on the other side of the country that you've never met that sends in the application and the CC companies are more than happy to extend them credit in your name.

Re:"Responsive and trusted"

[TapeCutter]

From an Aussie POV the claims sound like absolute bullshit to me. People might use PayPal to transfer a few bucks over the net but they're not going to put their life savings into it. Who the fuck do you call if there's a problem with PayPal, where are their bricks and mortar branches? The big four may be arrogant, slow and greedy but they are big because most Aussie's know they are the safest bet going.

Re:"Responsive and trusted"

[drsmithy]

Never said there was anything unusual about it, in fact as we both pointed out it's quiet "usual".

I think you might be reading my comment with the wrong inflection. When I wrote it, I was trying to point out it's not unusual for banks to do this everywhere, not just Australia.

As I was trying to point out, this is how Australian banks like to rip people off. Not only do they take 2% of a transaction when it's completed in a foreign currency (we are one of the _few_ nations where this is done, let alone the norm) [...]

In what countries is this not normal (or any of the other fees you mention, for that matter) ?

Re:"Responsive and trusted"

[Yvanhoe]

I also used to complain a lot about paypal and the ridiculous fees they impose to some transfers and then I compared to what banks offers. It was in 2009. These banks apparently STILL DON'T KNOW THAT INTERNET EXISTS. Paypal may have exaggerated fees, but regular banks have blatant racketing schemes (that you have to sign for 4 years minimum). It is actually that bad and Paypal IS very competitive compared to the usual bank sharks.

Re:"Responsive and trusted"

[Bill Barth]

It's 3% on my Citibank card here in the US. That's the normal rate for US-based banks for foreign transactions, BTW.

Re:"Responsive and trusted"

[numbski]

I'm replying at the top for one reason - because if I haven't seen this in the first few replies, it's dying to be said:

If you're less responsive and even less trusted than PayPal - you my friend, are royally screwed.

Because they don't screw us as bad

[bgibby9]

Simple but true (for the moment) ;P

Not supprising

[XMode]

When you put up fees and interest rates well above the RBAs increase, make up some excuse about not having enough income and then post profits in the billions of dollars, people tend not to trust what you say.

Re:Not supprising

[John Saffran]

Agree entirely .. the really stupid thing about it all is that the only reason they do so is to pad the balance sheet and meet the unrealistic expectation that profits must go up each year. Anything less is a failure.

Because the big four banks are already so large, it’s impossible for them collectively to grow at a faster rate than the overall economy. For one bank to enjoy higher growth means that they have to market share off the other three, and the big banks appear deeply reluctant to do this.

It’s clear from recent comments made by the banks that they’re dissatisfied with the rate at which their lending is growing. And this is backed by recent statistics from the Reserve Bank which show that while total bank lending for housing is relatively strong, (rising by 0.6 per cent in August to reach a level that’s 8.1 per cent higher than a year earlier), total business lending actually fell by 0.4 per cent in the month (and was down 4 per cent from a year earlier).

Faced with weak lending growth, the big banks will only be able to continue to report increases in their profits year after year if they are able to maintain – and, preferably build – their interest margins.

But this means that the banks are inevitably on a collision course with the rest of the community.

http://www.businessspectator.com.au/bs.nsf/Article/CBAs-bold-move-may-backfire-pd20101103-ATSKH?OpenDocument

Re:Not supprising

[Anonymous Coward]

The fact that Aussie banks are extremely profitable is a good thing. It means the person running it knows something about business. That profit is a handy buffer if/when default rates go up, and it also means that your super is kicking along nicely (because almost certainly you have some in banks, probably 25% or so).

And the financing costs aren't imagined, they are real. The actual increase as been about 1.7 percent or so, and they've reclaimed about 1.4 percent through going above and out of sync with the RBA cycle. They aren't bad companies, they are just rubbish at communicating to anyone but each other.

Re:Not supprising

[MojoMagic]

Not just profits of 'Billions of Dollars', but RECORD profits year after year... During a financial crisis no less.

People aren't upset about the banks making a profit (that's what they're there for). They're upset because the banks continue to make huge profits and then hike fee/rates/etc all the while complaining that "It's getting more expensive to operate in this industry".

Boo hoo!

Re:Not supprising

[noisyinstrument]

Retail lending is only a small part of the business. And the cash rate targets set by the RBA don't reflect the capital costs of raising money internationally (where a fairly large amount of Australian debt is financed from).

Of particular note is that that the record profit made by Westpac of ~AU$6billion was on assets of ~AU$700billion. Which is a fairly terrible margin. Also Westpac has the worst debt to deposit ratio of any of the big 4 (aka it is most at risk). Maybe they'll keep some of that cash on hand to lower the risk or something?

I'm no expert but there is a hell of a lot of completely uninformed nonsense out there in the Australian public's mind.

Physical access

[MichaelSmith]

With most Australian banks I can walk into a branch to address issues with my account. There are plenty of examples of people dealing with paypal and google where something goes wrong (say their account is suspended) and there is absolutely nothing they can do to make contact and fix the issue.

I don't think Australian banks should worry until their competition set up "bricks and mortar" premises.

Re:Physical access

[John Saffran]

There'll always be people who prefer walking into a building to do their banking, but for the rest it's entirely possible to have a non-physical bank.

To take the example of ING, they used to rely purely on online and phone banking (ie. no physical branches period) but have now added the post office network for physical needs and rely on other bank's ATMs for physical money withdrawal. Of course an online bank would need to have excellent reliability on their online systems and excellent customer service on their phone centres, but if you have both then what's the big deal?

Frankly, if a bank is untrustworthy it doesn't matter whether they're physical or purely virtual .. to follow-on from your example, there's nothing to stop a bricks-and-mortar bank from closing your account and giving you the run around, being able to walk into a branch won't change that one iota.

Re:Physical access

[MichaelSmith]

I don't know about Aussie banks but in the UK, "walking into a branch" to address issues is about as effective as "walking into a tree". You almost invariably find yourself face-to-face with a mindless drone who can do no more than what computer says.

Definitely not with the commonwealth bank here in .au. The people who work there know their jobs are hanging by a thread and go out of their way to be helpful. One branch I go to has a triage person near the front door who gets the gist of your requirements then forwards you to second level people. The last person I dealt with finished the exchange by asking me to rate their performance. It looked like a standard part of the process. I have never known a bank employee to be less than completely helpful. They are about 1000 times better than the web site.

Re:Physical access

[delinear]

You don't think that maybe the fees and charges are what helps to pay for the exceptional service? I suspect the reason most people have a miserable experience with banks, or any business for that matter, is because they value cheap over all else, and you pretty much get what you pay for (and let's face it, there's little to distinguish a bank until something goes wrong, so for most people they'll avoid the bank with the higher fees even though they might be glad of the higher level of service one day).

Australias net banking is actually damn good

[SpazmodeusG]

Australia's online banking systems are actually really good. Better than anything I've seen in the USA.

Now before any fellow Australians mod me down for saying that let me just say I've spent some time in the US. We really do have it good compared to what I've seen of their systems. In the US if you want to view the full history of your online banking you have to seriously pay a fee. Americans actually think it's normal to not be able to download the past years account transaction history with a few clicks without paying for it. You can't download PDFs or CSVs of an account via the online banking systems i used in the USA. Direct deposit to other accounts isn't nearly as easy as it is here either - I'm sure i'm not the only one who buys goods from Australian websites via Australian Direct Deposit rather than a credit card or paypal service.

Disclaimer: Most of my experience has been with Combank but i know the other Aussie banks are similar - the online banking systems here are pretty damn good. Now if only the home loan rates were a bit more reasonable here in Australia (currently pushing over 7% and rising).

Re:Australias net banking is actually damn good

[cyssero]

American here.

Most banks offer at least 3 months - 1 year of your account(s) history through their online database. This is for a free checking account from my experience. Beyond that you can only get the document in paper and you have to pay for it.

To put it into perspective - the Commonwealth Bank of Australia offer 7 years of statements online for free - even on fee-free accounts. They also allow you to search for previous transactions freely. They probably charge to print out a copy and send it to you, but with online statements going back that far and the ability to export to PDF and CSV - most people easily avoid the fee.

Re:Australias net banking is actually damn good

[metrix007]

Nah. I'm Australian and have a current account with ANZ and CUA, and used to have an account with Suncorp. In the US I have been with BoA and Chase. I can have transaction history for any period I choose, for free, and if I go into a branch the fee might be $2 or so, same as in Aus.

The main area the US is behind almost every other country in is direct deposit. I can't easily send money to someone elses account. Most countries have some equivilant of our BSB/account number setup, but not the US. Hell, they still have to use checks for most stuff.

The other interesting thing is that when paying with a visa/mc debit or credit card....no one checks for id, I don't need to put in a pin nor sign anything. If you steal someones card then its free reign till its called in and cancelled. I find that interesting.

Re:Australias net banking is actually damn good

[Anonymous Coward]

Aussie in the US here,
There's an amazing amount of culture shock with things that you wouldn't even think would be done differently.

The reason why Direct Deposit is virtually unheard of in the US is because their banks are really lacking in account security.
So much so that all you need is the account number, because the banks assume that only the account holder knows the account number.
As such, no one gives out their account number, so direct deposit isn't plausible, and they look at you like you're insane if you suggest it.

Additionally, it's virtually impossible to stop banks in the US from giving out account information to family members.
Hell, you don't even need to be a family member. "Hi, I'm Joe's roommate and I just wanted to check his balance before I cash the rent cheque he gave me" works fine.

Re:Australias net banking is actually damn good

[Cimexus]

Australian and American dual citizen here with multiple bank accounts in both countries.

You are right. The banking SYSTEMS in Australia are light years ahead of those in the US:

- In Australia you can send money via online banking, for free, to any other Australian bank account (direct deposit). All you need to know is the account number. It's how I paid my rent and some bills for many years. It's not instant but typically the delay is only 1 day for an account at the same bank and 2-3 days for any other bank.

- In Australia you can pay virtually any bill with Bpay. There's no real equivalent in the US. Sure there are a couple of similar systems I've come across ... but they are each completely unrelated to the other, have no interoperability, and virtually noone uses them. You end up having to sign up to several of these systems just to pay a single bill. What makes Bpay work in Australia is the fact that it's THE bill payment system, and EVERYONE uses it.

- EFTPOS in Australia (i.e. payment via debit card + PIN): much more widely accepted in Australia than the US. Even someone sitting in a temporary stall on a street corner accepts EFTPOS in Australia, whereas in the US it's really only medium to large stores, in my experience. And many won't let you do 'cash out' (i.e. pay for a $50 item with a $100 debit, and get the remaining $50 in cash, avoiding a trip to an ATM).

- Due to the above, cheques/checks have gone the way of the dodo in Australia many years ago. I had never SEEN a check in my life before I started living in the US. My parents got rid of their checkbook in the 80s. But in the US they are still very common, and in some areas, almost ubiquitous (I see people using them at supermarket checkouts for God's sake!). It's ridiculously antiquated but Americans seem to love them.

BUT ... Aussie banks do make ridiculous profits and the focus of this article is more that they have higher fees than in most countries, and tend to nickel and dime you any chance they get. Which is very true. The big four banks certainly could use some more competition. But it's not like they have none - there are plenty of smaller banks and credit unions that are competitive in Australia. But the downside of that of course is that their ATM network is far smaller. I think that's why most people stay with the big four in Australia - free ATMs everywhere you go. Whereas if you sign up with, say, Bankwest or Bendigo or something, you really have to plan ahead when you want to take cash out. Case in point: I am in Canberra quite a bit and I have a Bankwest account. The nearest Bankwest ATM is in Wollongong (lol). Sure I can use Commonwealth ATMs for free for cash withdrawal, but for anything else (e.g. changing my PIN, deposits etc) I have to travel a looonnng way ;)

Oh and PS, as an Australian, I will NEVER trust PAYPAL with any significant amount of money. They have twice frozen my account for no reason other than the fact that I had logins from different countries within a day or two of each other (did you know that there are these things called PLANES?). Once I can understand. But it took a week to get it unfrozen and I even told them explicitly on the phone that I was a dual citizen and flipped between the US and Australia all the time. And they STILL locked my account for the same reason less than a month later! Argh. PAYPAL are scum.

Re:What?

[nospam007]

"PayPal is a transaction broker. "

Paypal is a bank.

"As of July 2007, across Europe, PayPal also operates as a Luxembourg-based bank."
https://secure.wikimedia.org/wikipedia/en/wiki/Paypal

All I can say is...

[SeaFox]

Australia's banks must be pretty bad if people trust PayPal more.

Re:All I can say is...

[Ihmhi]

Paypal: we keep your money so safe, sometimes we don't even let you touch it!

Re:What?

[rudy_wayne]

"PayPal is a transaction broker. "

Paypal is a bank.

"As of July 2007, across Europe, PayPal also operates as a Luxembourg-based bank."
https://secure.wikimedia.org/wikipedia/en/wiki/Paypal [wikimedia.org]

"In the United States, PayPal is licensed as a money transmitter on a state-by-state basis. PayPal is not classified as a bank in the United States, though the company is subject to some of the rules and regulations governing the financial industry including Regulation E consumer protections and the USA PATRIOT Act."

https://secure.wikimedia.org/wikipedia/en/wiki/Paypal

Raise Rates?

[ikkonoishi]

Is high interest bad? Doesn't that mean that they give higher returns on deposited money or is this just the interest on loans?

I can see that if the banks can raise the interest they charge on the money they loaned out alone that collusion would be a problem since otherwise the customers would just refinance with another bank with lower rates. If they all work together the customers don't have anywhere else to go, but I would think that if they all raised rates then unless there was some legislative block on credit union type places popping up to attract customers away that they would be limited by the chance of bank runs.

Re:Raise Rates?

[kramulous]

I'm currently earning a 6.51% on the cash that is not invested (probably will raise another 0.25% at least in the next few weeks). So, you are right. I am earning a nice, guaranteed rate on idle cash deposits. Not as good as shares, after the biggest drop in 80 years, but a bankable rate.

It's a predictable two edged sword ... those that are debt addicted suffer, those that are not are happy.

Different expectations

[dugeen]

People trust Google more (if indeed they do) because they expect less from them. Google's free services promise nothing (in a legal sense) but usually deliver an acceptable service; banks have definite legal obligations which they often fail to meet. If you have to deal with Google in an IRL sense (trying to get them to fulfil their data protection obligations, for example) you'll form a different impression - you might well prefer to be on the phone to a bank's Indian call centre, staffed by people who can't understand you and couldn't help you if they could.

I trust Google...

[aceofspades1217]

more than banks hands down. My family are invested in a regional bank and I just got an e-mail stating that they are ending my free checking and that if I don't deposit more money they will charge me $5 a month.

Google may not be perfect and they screw up sometimes but they are the kind of screw ups you glance at shame on you and move on. I mean sure they were taking public wifi data but cmon' it was public data and it was just random packets so that they do location services. Heck, I have an incredibly hard time finding unsecured networks as almost all routers nudge users to security a lot more then they used to. My friend's aptartment has no internet and there are 15 wifi networks and all of them are secure.

Anyways, how can credit unions be shamed for "collusion", they aren't even a for-profit company. Credit unions are the closest thing the banking sector has to a charity so saying they are colluding is like saying the United Way, Red Cross, and Goodwill are colluding for holding joint event.

Re:Of course they are in collusion.

[Crypto Gnome]

Only a joke in the sense of being TRUE , but still funny.

While they might not have colluded in the legal sense, they have colluded in the practical sense.

Why the law defined it as "all of their CEOs had to get into one physical room at the same actual time and at least verbally and preferably written down on some kind of physical medium, they agreed to follow a common set of practices in order to screw the market over".

The end result is the same, The Banks have NO REAL COMPETITION and NO LEGAL ENFORCEMENT preventing them from SCREWING THEIR CUSTOMERS *to an unreasonable extent*.

Seriously folks, I'm all for "they're a business, they need to make a profit" but continuing to make *record profits* during the GFC AND still continuing to whine about HOW HARD IT IS BEING A BANK is just a tad unbelievable.

Paypal "responsive and trusted"?

[Ritz_Just_Ritz]

Those aren't words one would usually hear associated with Paypal. Their customer service is rather poor in my experience so I shiver to think what bank customer service must be like in Australia.

PayPal? Trusted? Huh?

[creed_nmd]

If PayPal are more trusted than the banks that makes it very clear just how bad the banks are. I wouldn't trust PayPal with toy money my nephew left down the back of the sofa.

The trouble with non-bank banks

[Animats]

The problems with PayPal are well known. PayPal should be regulated as a bank in the US, so customers have recourse to banking regulators when PayPal is holding the customer's money against the customer's will.

Not that PayPal's competitors are better. WePay got press by putting a block of ice with money inside in front of the PayPal conference. But they have miserable customer terms, like PayPal:

• You may not transfer or assign any rights or obligations you have under this Agreement without WePay's prior written consent. WePay reserves the right to transfer or assign this Agreement or any right or obligation under this Agreement at any time. That's backwards, since they have your money, and you don't have their money.
• You agree that WePay, in its sole discretion, for any or no reason, and without penalty, may suspend or terminate your Account (or any part thereof) or your use of the WePay Services and remove and discard all or any part of your Account at any time. Discard your account? With your money in it? That's what they're saying. Banks have to immediately refund your money if they close your account.
• IN NO EVENT SHALL WEPAY, its EMPLOYEES OR SUPPLIERS BE LIABLE FOR LOST PROFITS OR ANY SPECIAL, INCIDENTAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR IN CONNECTION WITH OUR WEBSITE, OUR SERVICES, OR THIS AGREEMENT (HOWEVER ARISING, INCLUDING NEGLIGENCE), UNLESS OTHERWISE REQUIRED BY LAW. Banks can't get away with that.
• WePay reserves the right to change, modify, add, or remove portions of this Agreement (each, a "change") at any time by posting notification to the WePay website or otherwise communicating the notification to you. That's out of line for a bank-like service.
• Any Claim between you and us shall be resolved, upon the election of either you or us, by binding arbitration. So you can't sue them. Banks have been in trouble for that, even for credit cards, where you owe them money. Remember, WePay is a depository institution - they hold your money. You never owe them money.

As for having a "brick and mortar" location, when I run WePay.com through SiteTruth, it reports the address of a house in San Jose. That's the address they gave the U.S. Securities and Exchange Commission as their place of business.