The destructive floods dislocating communities in regional and urban parts of eastern Australia have exposed the perils of aligning the digitisation of the national payments system with a strategic mission to eliminate cash as a payments method.
As regional centres in NSW and Queensland have endured protracted outages of telecommunications, broadband and power services in the last month, the evidence is manifest that most automated channels have exhibited the lowest levels of resilience in the face of another natural disaster.
The flood crisis shows that residents and businesses in affected communities naturally turn to cash as their preferred method for securing essentials when digital systems dislocate.
For these people hard currency is king again because it delivers psychological certainty.
Technology-dependent methods of payment – mobile apps, internet banking and point of sale platforms – simply cannot match that certainty or public confidence when telco services perform patchily or go down for days or weeks.
But getting access to the only payments medium that works in flood-hit regions has proven a challenge for thousands of Australians in the last month.
While major banks such as CBA and NAB have been swift to offer loan repayment relief and fee waivers to borrowers in Lismore and other inundated communities, mutual banks and credit unions in the hardest-hit regions have been the quickest getting affected customers access to their own money.
Summerland Credit Union, which is headquartered in Lismore’s CBD, had its local branches wiped out by the floods last week.
Summerland’s chief executive John Williams told Banking Day yesterday that there was barely a business still operating in Lismore.
“The central business area was decimated last week,” he said.
However, on Friday night the resourceful CEO won support from Southern Cross University to open a makeshift branch on the institution’s hill-top campus, four kilometres outside the town centre.
“We were open for business on Sunday, which allowed customers to start withdrawing cash,” he said.
A remarkable feature of Summerland’s makeshift branch is that Williams – who is also a director of the Customer Owned Banking Association - has opened the outlet to members of five rival mutual banks that also service customers in the Lismore region.
The branch is now a “community banking hub”, supported by Summerland, Newcastle Permanent, Southern Cross Credit Union, G&C Mutual and Greater Bank.
In a stark contrast, customers of the four major banks still had no way of sourcing cash on Monday unless they opened a new account with one of the mutual deposit takers and somehow got funds transferred into it.
ANZ yesterday despatched from Melbourne a generator-powered ATM with satellite functionality but a bank spokesperson could not confirm when it would be air-lifted to Lismore.
The collaborative effort of the mutual banks in Lismore might be a harbinger of the way major banks and ATM providers such as Armaguard and Prosegur will soon approach the long term challenge of preserving access to cash across regional Australia.
In the last two years Armaguard and Prosegur have been locked in a battle for domination of the ATM market, but there is intense conjecture within banking circles that the bitter rivals are now working on collaborative venture for provisioning cash to regional areas.
The Reserve Bank is currently reviewing the banking system’s distribution arrangements for banknotes and in a recent discussion paper appears to be nudging the industry to adopt a utility business model.
A utility would involve the major banks, cash transit companies and ATM providers forming a single entity to coordinate the distribution of banknotes across the country.
While such a structure would normally encounter resistance from the Australian Competition and Consumer Commission, the RBA has said repeatedly that it would support a utility on public interest grounds.
The 2022 floods and previous natural disasters have highlighted profound flaws in the major banks’ strategic attacks on cash.
Under the current industry arrangements, the major banks’ shared obsession for migrating rural customers to digital platforms has made them each less able to respond effectively to spikes in cash demand triggered by natural disasters.
The digital banking revolution has coincided with deep cuts to branches and the banks’ proprietary ATM services across the country.
This decade-long trend has stretched the average distance that non-metropolitan Australians must travel to source cash.
It’s a trend bound to intensify for as long as the four major banks wage war on a legitimate mode of payment that unerringly exhibits resilience at the most critical moments in people’s lives.
The major banks should shelve their campaigns to de-legitimate customer efforts to transact in person with cash.
It’s a myopic strategy in a country prone increasingly to devastating weather events.
The calculated effort last week by the National Australia Bank to prevent customers from paying credit card bills at branches should be judged for what it was – a pathetic tactic aimed at exacting changes in customer behaviour.
Instead of dabbling in such dark arts, NAB and its cohort should study Summerland’s boss to grasp what bankers can achieve in their customers’ most difficult moments.