Banking – and the future

The banks seem to be copping it at the Royal Commission, and there have certainly been some fascinating revelations.   I wonder where this is going to lead in terms of recommendations?

The Royal Commission forms an interesting backdrop to the magazine that fell out of the Australian newspaper a few days ago.  It was supposedly all about “The Future of Banking”.  The articles were all to the effect that the banking scene will inevitably “change” over the next few years.

Admittedly, my interest in the banking system these days is in relation to making payments (not so much borrowing).    Perhaps it is on the lending side of their business that banks are most likely to have to change.  Hopefully, this will enable their staff to go to being bankers (who assess risks) instead of “product salesmen” (and “dumbed-down” at that), as it is said they have become.

And, yes, maybe things on the payments side will be delivered differently:  the advent of “paywave” seems to have been popular.   But is cash really going to disappear?   While the local coffee shop has a surcharge of nearly 2% for any electronic payment, and I was quoted a surcharge of 1.5% if I chose to use a credit card for a recent transaction, it seems to me that we have some way to go before we reach a cashless society.  Perhaps the “New Payments Platform” will reduce these types of costs?

But to get to the point:   the articles in the magazine contained a lot of statements along the lines of the need for financial institutions to be “responsive” to the needs of customers.   But, hey, let’s not get carried away here.   For the vast majority of us, it’s not rocket science.   Our basic everyday need is to have somewhere to keep our money and the ability to make payments with a minimum of fuss without (at least in my case) incurring a transaction cost.   And, yes, “Paywave” is the sort of thing that appeals to me – except when there’s a surcharge involved.   But I get irritated when I have to monitor my “everyday” account to make sure that there are adequate funds in it, because the account in which I keep my modest surplus funds (to obtain a token rate of interest) isn’t the one from which payments are made.

For a short time, I had an account with U-Bank, which offered a sweep facility between the transaction account and the interest-bearing account, but after working out what was going on (maybe I’m just slow?) there were still “strings” attached:   the interest bearing account only paid interest if a minimum monthly amount was paid into it, which of course called for anther layer of complexity to set up arrangements to ensure that this happened (and then to monitor them).

I could go on, but let’s leave it at this:   financial institutions (and perhaps the commentariat?) need to distinguish between technological change and “mindset” change.  Just because their customers appear to be using the shiny new things provided to them, such as “Smart ATMs” or apps on their phones or whatever, doesn’t mean that the institutions are meeting the “needs” of those customers.



When I was “growing up”, we’d never heard of an avocado.    I can remember when I was first introduced to them:  they were only available for a couple of months each year.    But now, they seem to be an integral part of our diet and are available year-round.  As I understand it, this is because they’re now grown in a number of different places.

But  recently, there was a shortage.  There was a sign in the supermarket saying that there weren’t as many coming from Western Australia (see also the news report).  This put matters to a test in our house.  My inclination was to forego them, but, for better or for worse, this didn’t happen and we still bought them, although we did cut down a little.

I now notice that prices, although still elevated,  are returning to be more in line with we regard as “reasonable”.

The challenge of change

I admit that I sometimes go to Chadstone, mainly for a catch-up coffee with R.    One or two of my friends say that haven’t been there for years (and in a way I can relate to that).   And, yes, things are always changing at Chadstone.    But the current changes are occurring in the “old” food court area.

Now, that’s a challenge:  this is a part of the place that I’m familiar with!     There are hoardings erected, encroaching on the familiar layout.   How dare they muck around with it!

Ah well, first world problem (another one) I suppose.

A new credit card?

A letter with a new credit card arrived from the bank.   I wasn’t expecting this, so I looked at it a bit more closely.  No, the existing card still had over 2 years before reaching its expiry date.  The new card was to be an “upgrade” to a different “level”, and would replace the existing card.   Supposedly it would provide slightly “enhanced” rewards (although on closer inspection, these were at best marginal).  And I guess, for the “status-conscious”, it looked better.

The “downside” was that there would be a new card number and PIN, and although the blurb stated that the annual fee would remain unchanged, I wondered how long that might last.  The “nil” fee on my existing card has been in place for some years, and the “fine print” with the new card (in VERY fine print and hard to find) stated that there might be fees and charges on some of the award “Privileges” on the new card.

Call me suspicious if you will, but it sounded to me that the the end result of the “upgrade” might well be that somewhere along the line, sooner or later, there’d be an increase in some way of the fees or charges.   Hence, I haven’t “activated” the new card.


Bitcoin (again)

I admit that bitcoin (and cryptocurrencies generally) hold a fascination for me, mainly because I can’t get my mind around how they work.   Hence, because of this – and also because, frankly, I can’t see what’s in it for me! –  my inclination has always been to  stay well away from any cryptocurrency!

However, bitcoin has been quite prominent in the news of late, because its price nearly got to the US$20,000 barrier, before falling back to around US$10,000.

Of course, this gives rise to all those “if only I’d bought some” reflections!    Hindsight is wonderful, but even so, I don’t have any regrets.

Apart from the volatility in the value of bitcoin, a reason for having no regrets is that the tax implications of dealing with cryptocurrencies are complex.    Although  GST seems not to be a big issue, as the ATO accepts that digital currency is a method of payment,  capital gains tax may be involved.  There are also potentially issues under the anti-money-laundering laws.     So the news that the tax office is getting set to “blitz” investors in bitcoin (and other cryptocurrencies) shouldn’t come as any surprise.

Of course, anonymity is prized by some holders of bitcoin (who see it as a currency without a central bank), but it seems that the authorities have a number of weapons at their disposal, including Austrac’s powers to gain information from digital currency exchanges along with requirements for customer identification.  Combined with the with the ability to obtain similar information from other jurisdictions under double-tax treaties (for example, the US and Japan), it seems that at least some of bitcoin’s perceived “benefits” might not be quite as significant as some of those who are involved in it might wish.

As I’ve stated,  I don’t pretend to understand how cryptocurrencies work, but my imprression is that, although bitcoin transactions (being a blockchain) can be “peer-to-peer” without the need to go through an exchange, transactions involving the purchase of bitcoins, or their conversion back into currency, usually need to be done on an exchange, and it is at this point that the authorities appear to have the ability to watch what’s occurring.

The “New Payments Platform”

The banks in Australia have been working towards improving the inter-bank payment system.    The website is here.   Although there has been a little publicity (NAB were publicising it as far back as December 2015),  so far there doesn’t seem to have been big fuss about it, but there are signs that it’s coming.

The ABC ran a report on it a little while ago, highlighting some of the issues that might be involved.  One issue identified is that once a transfer instruction is given, it’s irrevocable.  This seems logical;  after all, if the payment is made virtually instantaneously, it’s a bit hard to expect the bank to be able to reverse it.   Similar to handing over cash, really .

The NPP website has a section dealing with scams.   Obviously, these are always a risk with any payment system and they’ll still be around with the NPP.

NAB sent me some revised Terms and Conditions setting out changes to the terms of various transaction accounts.  However, these were mostly concerned with the “fine print”, and weren’t really concerned with “selling” the new system.

On the NAB website

My hunch is that we’re going to hear quite a lot about the NPP in future months, presumably stressing its advantages, being faster payments and simpler identification.  In fact, I think there was a TV advertisement about it the other day?   Given that we’re in the 21st century, the NPP is kind of inevitable.

First Masters, now Bunnings…..

It wasn’t so long ago that Woolworths walked away from massive losses as a result of their foray into the Masters home improvements stores in Australia.   Now Wesfarmers are taking a massive hit (a write-down of $931 million) as a result of their efforts to develop the Bunnings format in Britain.

Illustration: Simon Bosch

What is it with these guys?  The common theme seems to be a belief that a concept that works in one country can be transported to another country, along with plunging in too deeply from the outset.   They said as much in one of their statements:

“[The] loss for the half reflected continued trading and execution challenges as a result of the rapid repositioning of Homebase following the acquisition”.

This is in the context that Homebase wasn’t doing well when Wesfarmers acquired it – yet the latest report says that revenue was down even further (by 15.5%).

It was reported some time back that apparently as soon as Bunnings got the keys to Homebase they axed the entire Homebase senior management team and about 160 middle managers.  Talk about plunging in the deep-end.

And this article from a few months ago suggests that the powers-that-have-been running the show may not have been in touch with the British market.  Big barbecue burners and up-market jacuzzis may work in Australia, but do the Brits want them?   And some more insights here.

As we have (modest) shareholdings in both Woolworths and Wesfarmers, we can only look on with dismay.   But it could be worse, we could have had shares in Myer!