Inquiry finds banks playing a dangerous game

Recent findings of the Senate Inquiry into regional bank closures determined that greed resulted in banks not only posing dangers to customers but the environment as well.

In this second instalment of Dale Webster's series, she examines the dangerous game banks have played with the truth when justifying closures. Read part one here and part three here.

Failure to do due diligence

Perhaps the most staggering fails of the big four banks to come to light during the Senate Inquiry into regional bank closures is that they appear to have changed their business models to “digital first” and took away face-to-face access to banking without checking how many of their customers would not be able to use the technology.

The Digital Inclusion Index is a highly respected research database that has been run in collaboration by RMIT and Swinburne universities and Telstra since 2014, meaning anyone wanting to know how many Australians can and can’t access digital banking has had the information available at their fingertips for the past decade.

This research was quoted repeatedly in submissions, including those from state governments, to both the Regional Banking Taskforce and recent Senate Inquiry.

Exclusion from the digital world is at the heart of the welfare issues being caused by regional bank closures. Yet, ANZ chief executive Shayne Elliott told the senators at the September 2023 Canberra hearing that he was not familiar with the database.

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He had just explained to the senators that according to research by the University of South Australia, “most older Australians like and accept the online banking environment and that Australians over 65 are responding in line with younger cohorts in adopting digital banking”.

The senators noted the contradiction between this research and what they had been told by other witnesses quoting the Digital Inclusion Index.

Had Mr Elliott done his due diligence before starting to strip away face-to-face service by closing branches and removing teller service, he would have discovered that the number of Australians excluded from digital banking is roughly 7 million.

That is almost a third of the population of Australia who depend solely on cash and cheques.

It’s not just about having the ability to use technology — the index tracks other important factors such as connectivity and being able to afford the devices required to access digital technology and run them.

The East Gippsland Shire said in its submission:

“Online banking services using mobile, fixed or satellite connectivity is only as good as location, internet services offered, capacity to pay and digital literacy and is contingent on good power supply that is often problematic in East Gippsland.”

David Morcom, chief executive of neighbouring Wellington Shire, the third largest municipality in the state with more than 45,000 residents, brought the numbers with him to the Sale hearing.

Morcom told the senators:

Two-thirds of our community don't have access to broadband.

Thirty per cent of the population in Sale is over the age of 60 and 8% of Sale's households don't have a car. The Australian Digital Inclusion Index, which you may be familiar with, measures access, affordability and digital affordability. Wellington Shire's index is typical of many regions at 65, as opposed to a Victorian average of 72, so there is a clear level of disadvantage that we experience in the regions.

After being tackled by three senators in a row over his lack of awareness of the Digital Inclusion Index, Mr Elliott said he would “have a look at it”.

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Elliott added:

“I am sure there are always things we can learn.”

The senators would later find out that the study quoted by Mr Elliott involved only 46 people being interviewed, none of them were from regional Australia and that ANZ had paid for the research.

The biggest lesson for Mr Elliott from this Inquiry may well be that politicians do not appreciate being treated like idiots.

Gaslighting

The major banks and the Australian Banking Association have continually blamed customers for the closures of their local branches, quoting falling visitation and a rise in digital transactions to justify their decisions.

This has been consistently met with confusion by customers who say the branches were always busy.

It turns out they were probably right.

Whispers of profitable branches being closed due to policies to forcibly transition customers away from face-to-face service to distort data used to justify closures have been around for about a decade but it was the Financial Sector Union’s submission to the Regional Banking Taskforce that finally exposed the practice.

Bank whistleblowers told of being performance-managed to reduce over-the-counter interactions with customers, sign up customers for digital banking and use ATMs to get cash.

Of course, with considerably more banking representatives on the Taskforce than MPs, it was not until the latest Senate Inquiry that the FSU was able to deliver the information to a receptive audience.

Queensland executive secretary Wendy Streets was the final witness at the first hearing at Sale and said:

Today, you've heard from representatives of the banking industry that regional branch closures are solely driven by customer preference — that customers are voting with their feet and crying out for digital options to do their banking, instead of the traditional branch model of service.

Get used to it. You will hear this repeated ad nauseam for the duration of this inquiry. You heard phrases such as ‘we want customers to be aware of all their banking options’ and heartwarming stories of the convenience of banking when you want. These are weasel words, in our view.

The banks claim that the public prefers to complete their financial transactions online. However, it is disingenuous for the banks to single out their customers as the reason for these closures. It is the banks that have enforced this change. It has long been part of the business model of all of these banks. The banks have engineered the move to digital and herded their customers into these options.

Streets went on to read statements from bank staff explaining how this was done.

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Throughout the Inquiry and even Senate Estimates, bank executives were grilled over the manipulation of data, with National Australia Bank (NAB) copping the brunt of the assault.

Their release of closure “fact sheets”, a result of a taskforce recommendation the banks had hoped would take the heat off them, left them exposed to closer scrutiny than they had ever had to deal with before.

Then a slip-up on one of the documents blew the lid off the scam: NAB was only counting transactions.

All the essential business that customers need face-to-face assistance with that didn’t result in a transaction (everything that could not be done using Bank@Post) was not being recorded.

NAB was also caught omitting to mention that 63 of the branches it had closed in regional Australia since the start of 2021 because of “declining visitation” had their opening hours drastically cut at the end of 2020.

Customers giving evidence at the Inquiry confirmed that many branches hadn’t even been opening during these reduced timeframes.

Add in the practice outlined by the president of Shire of Wyalkatchem, Quentin Davies, of banks moving big farming and business accounts to branches in larger centres and it became very clear that the banks have been playing a dangerous game with the truth when justifying closures.

While the gaslighting didn’t please the senators, it was what was hidden under the data fudging that for them was unforgivable — that the branches that were being closed were profitable.

Until this Inquiry, this was always a grey area, with an inference when announcing a closure that because customers were not using a branch it was therefore not a viable site.

But from the moment a Westpac executive admitted under questioning at the first hearing that a decision to close a branch at Sale was not based on profitability but rather a desire to change the operating model, the senators were on the scent of a scandal.

Closing a branch because it was losing money could be accepted; closing it at such a high human cost because of greed is a difficult thing for any reasonable person to rationalise, if not impossible.

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Transferring costs

The big banks have two types of savings in their sights these days – monetary and emissions – and it is debatable which is worth more to them.

For the $1 million a year estimated to run a branch – a paltry sum compared to the billions in profits the banks make annually – it may well be that the electricity savings they are claiming against their net zero targets are the real prize as “clean and green” becomes its own currency.

But as the banks close in on net zero, customers have been telling the government inquiries about the extent to which they have had to take to the roads – and even the air in some cases – to chase banking services they could once access in their own community.

They are bearing the cost of fuel, wear and tear on their vehicles and time lost away from work and businesses.

They are also adding to their carbon footprint each time they travel out of their area to do their banking.

Until recently, there was no way for anyone without inside knowledge of how many customers a bank branch had to correlate the amount of travel that would be generated by its closure.

However, thanks to activity data being included in the recently introduced “fact sheets”, that is no longer the case.

Numbers are broad but they do provide a window into the environmental impact of branch closures for the first time and confirm suspicions that closures are most likely generating more emissions than are being saved.

Using a basic carbon footprint calculator, an analysis of customer numbers at 31 regional branches closed by NAB leading up to and during the Senate Inquiry shows that, at the bare minimum, the emissions generated by the extra distance customers would need to travel to access banking services equates to 10% of global CO₂ savings claimed by the bank under the Federal Government’s Climate Active program in 2021-22.

What’s worse – and this was something the senators cottoned on to during the Inquiry – the bank has been using branch closures to help meet its net zero targets.

NAB says in its 2021-22 Climate Active report the savings it made that year were achieved mainly through reducing its electricity consumption which ‘can be attributed the consolidation of NAB’s property portfolio (commercial buildings and branch closures) and relocation of colleagues into new, energy efficient buildings...’

Former NAB chief executive Ross McEwan didn’t like being asked about this at the Canberra hearing in September 2023 and became agitated when Senator Gerard Rennick asked if branch closures were linked to executive bonuses.

Mr McEwan denied that they were, but NAB's 2022 climate report states that climate change had been formally added in 2021 to NAB’s Risk Management Framework, which it says is used by the board to help determine executive “variable rewards”.

In response to a question on notice from that hearing, NAB confirmed that branch closures helped the banks achieve a 10% reduction in total energy usage across NAB’s branch network between the year ending 30 June 2021 and the year ending 30 June 2022.

By anyone's standards, this isn't a good look.

Read part one of this story here.

Dale Webster is an inaugural recipient of a Walkley Foundation Grant for Freelance Journalism on Regional Australia. This article was originally published on The Regional and has been republished with permission. You can follow Dale on Twitter @TheRegional_au.