UBank pulls down the shutters on cash deposits

National Australia Bank's online banking division, UBank, claimed a first late in August, when it launched its entry into the transaction banking market. NAB said USaver Ultra was the first transaction account that would automatically sweep excess balances into a linked high-interest savings account.

However, the real significance of USaver Ultra is that it appears to be the first transaction account that does not offer a facility for cash deposits.

According to USaver Ultra's terms and conditions, UBank will not accept cash deposits. The bank confirmed this. There is no Australia Post agency arrangement (a common feature of online accounts) and no ATM deposit facility.

When asked why it was offering a transaction account that does not include such a basic facility, a bank spokesperson sent this response: "Ubank is online only, which means it has lower operating costs and is able to offer customers a more competitive deal on interest rates and fees. Its customer base is savvy, self-directed money managers who have a strong preference for electronic banking over traditional banking facilities."

"NAB recommends customers who require cash transaction facilities consider NAB Classic Banking."

UBank's decision raises some interesting questions. Is USaver Ultra really a transaction account?

Would the bank have a case to answer if the Australian Competition and Consumer Commission or the Australian Securities and Investments Commission were to receive complaints that the product description was misleading or that customers had incurred additional costs because they had to set up an additional transaction account to handle cash?

Is USaver Ultra the start of a trend towards cashless transaction banking? The use of cash, relative to cards, is in gradual decline, and other banks may decide it is time to go down the same path.

The regulatory position appears to be that a cash deposit facility would be an important product feature for some types of customers, such as small businesses and young people with casual jobs, but not for UBank's target market.

The regulator would take into account the fact that UBank's brand is built around it being entirely online. This attracts a certain type of customer with a certain set of expectations, who may not be adversely affected by the absence of a cash deposit facility.

A regulator would also look at whether a customer suffered detriment or financial loss. Given that USaver Ultra has no monthly account keeping fees, the need to operate a separate account to manage cash might be seen as an inconvenience but not a detriment.