Regional Banking Services and ATMs

3rd Jun 04

Mr ORGAN (Cunningham) (4.18 p.m.) — I welcome the opportunity to support the member for Bruce in this matter of public importance on the government's continuing failure to ensure that regional and rural Australians have access to affordable banking services. This is not just about country Australia, as the member for Parkes would have us believe. It is about remote, rural and regional Australia. My seat of Cunningham in the Illawarra is certainly regional, and like other areas across Australia in recent years we have seen an almost continual stream of bank branch closures, stretching back for the whole of the life of this government. Those closures have not resulted in improved services for ordinary Australians—far from it.

The member for Bruce has given a good overview of the changes in banking services in this country over the last decade and the ballooning of bank profits, not to forget the outrageous payments to banking senior executives that we have seen in recent years. Unfortunately, the community has largely been left behind, with banks blinded by the push for shareholder profit at the expense of services.

We in Cunningham are fortunate to have three significant non-bank financial institutions headquartered locally, which serve the community well. I speak of building societies and credit unions, such as the Illawarra Mutual Building Society, the Illawarra Credit Union and City Coast Credit Union. But there is little doubt that face-to-face banking is a vanishing species in this country. We have just heard the member for Parkes talk about that. There is no doubt that more and more people in Cunningham are being forced to rely on electronic banking in its various forms, including the use of automatic teller machines to obtain cash—something they are now dependent on since the virtual abolition of cash wage and salary payments. We know that the use of electronic forms and credit cards et cetera is causing a debt crisis in this country. That is something we should be mindful of in this debate.

In speaking of ATMs, which is so much the face of banking in Australia today, I was bemused yesterday by the Treasurer's reply to a question from the member for Bruce when he said that he expected the Reserve Bank to lay down rules to encourage competition and the best deal for customers. I am concerned that recent developments in the ATM market may mean that this is nothing more than a pipedream. There were 21,603 ATMs around Australia in June 2003, up from 16,398 in June 2002—an increase of 32 per cent in just one year.

Mr Ross Cameron —Fantastic.

Mr ORGAN —`Fantastic,' he says. On the other hand, it took three years for the number of ATMs to grow from 10,089 in June 2000 to 16,398. Clearly something is happening out there, and whatever it is you can rest assured that it has little to do with better service and everything to do with increased profitability. You have only to look at your own bank statement. I looked at my bank statement this morning. There are transfer fees of $1.50 and monthly account fees of $5 or more. There are lots of fees that we are being hit with as part of this new environment of electronic banking.

As I said just now, I am concerned about recent developments in the ATM market—developments which may adversely impact upon the everyday banking behaviour of Australians and the costs of that behaviour. That concern is based on the fact that just over a quarter of the ATMs existing in June 2003 belong to one provider, and that provider is being taken over by a major player from the United States. First Data Corp., the parent company of money transfer giant Western Union, is acquiring Australian ATM provider Cashcard through its local subsidiary First Data Resources Asia Pacific Ltd.

For members' information, Cashcard has more ATMs than the Commonwealth Bank—around 5,670, in fact. That is about 49 per cent of the independent ATM market and it reportedly accounts for about 10 per cent of the debit and credit processing market. That is right: 10 per cent. Cashcard has more than 50 member institutions, by far the majority of them from the building society and credit union sector, which of course operate as mutuals where profits benefit members through reduced fee structures and lending interest rates rather than being returned to shareholders as dividends. One of these members is the IMB, the Illawarra Mutual Building Society, whose headquarters are, as I said, in Wollongong in my electorate of Cunningham. The IMB has 38 ATMs across three states and the ACT. So Cashcard—which is 15 per cent owned by the Australian building society network, 15 per cent by Suncorp, eight per cent by St George Bank, five per cent by Adelaide Bank and 29 per cent by Gresham Private Equity, among others—will fall into the hands of just one company. That does not seem to me to do too much for competition in the ATM market. And it does less when you realise that First Data Resources Asia Pacific Ltd describes itself as Australia's largest independent electronic payment systems network. Indeed, our local subsidiary of this US financial giant—for that is what First Data Corp. is—has as its objective:

... to process every electronic transaction in Asia Pacific from the point of occurrence to the point of settlement.

Does this mean they want to monopolise the market? It sounds like it to me. First Data Corp. returned a net income of $US1.4 billion in 2003. It employs 29,000 people and is ranked at No. 242 on the Fortune 500 and No. 130 on the FT Global 500. First Data is a US financial giant, with a lot of muscle to flex. It has so much muscle in fact that US authorities took legal action to prevent it from acquiring another debit processing network company, Concord, on the grounds that the $US7 billion merger would substantially reduce competition in transactions which require the entry of a personal identification number—that is, the PIN we all use every time we access funds through an ATM. First Data and Concord settled the matter by agreeing to divest First Data's interest in another PIN based debit network.

So the fairly obvious question arises: is First Data picking up Cashcard, a PIN based debit network, in Australia to fill that gap? Clearly the Australian Competition and Consumer Commission, the ACCC, does not think so. It has said that it would not oppose the acquisition of Cashcard by First Data because the presence of other strong competitors in the markets is likely to operate as an effective competitive constraint on the merged entity, thereby constraining attempts to raise prices to customers.

I wish I could be as confident as the ACCC. The prospect of an overseas controlled financial giant owning the ATMs and Australia's largest independent electronic payment systems network is not one which I am at all comfortable with. It needs to be looked at very carefully. It goes to the heart of what we are debating today—that is, ensuring that rural, regional and remote communities in Australia have access to affordable and accessible banking services. It is going to be pretty difficult to keep fees down if one multinational financial giant controls the lion's share of the system. Despite the Treasurer telling us yesterday that the government wants a `competitive, pro-consumer outcome' to banking fees and surcharges, that is going to be pretty difficult to obtain when one overseas company controls 49 per cent of the independent ATM market.

What the people of rural, regional and remote Australia want is action to ensure that they have access to affordable banking services. The government must act to ensure that this is the outcome, rather than putting their money on so-called free market forces. The government cannot continue its hands-off approach in this area. Less well off people in our community, including those in my electorate of Cunningham, are telling me they are abandoning banks in some instances because of the exorbitant fees. There is little doubt that there has been an increase in the variety of banking services available to most Australians. But we are talking here about quality, not quantity, and it is here that the government has a role to play. Charges cannot keep spiralling. It would be good to see some sort of leadership from the Treasurer here.

I think we should be aware that in rural, regional and remote areas of Australia there is real concern about rising costs, the prevalence of online services contingent on good Telstra networks, less face-to-face banking and less employment in the sector. We have heard the previous speaker talk in regard to Telstra about the universal service obligation. I think the community would welcome some sort of universal service obligation for the banking sector as well.