Do you trust your bank?

Ross Greenwood speaks to George Frazis, CEO of Westpac Consumer Bank, about rebuilding trust in the banking sector

Introduction: Do you trust your bank?

Ross Greenwood:  Banks. We’ve spoken so many times on this program about the reputation of banks and the way in which, especially over the past two to three years, that reputation has been thrown out the window in some cases because of the behavior of some bankers and the bankers themselves. Therefore, the impression and the perception of the banks in the public’s mind. Now one curious thing that I often tell you about banks is, if you ask a person about their bank and their experience, they’ll say, “Actually, it’s quite good. I’m okay.” Then you actually go and ask them about banks generally, they’ll say, “Oh they’re terrible. They rip people off. They make big profits.”, and all of that type of thing. Oddly, the perception about a person’s own experience, compared with their broad perception of banks and the industry as a whole, can be quite a different thing. Now, banks are trying to win back hearts and minds right now. I’m not terribly certain that they’ll be all that successful in doing this, certainly not quickly. The other aspect of this is, bear in mind that the banks are trying to head off the calls for a royal commission from the parliamentary party, being the labor party, which is way ahead in the polls at this stage.

If the election were held next weekend, Bill Shorten would be the Prime Minister and there would be a royal commission into the banks. The banks themselves, they’ll start to take their own actions to try and change. One, which I think was was a bit cockamamie, maybe in my sense, was about the $2 charge on the ATMs. While that seemed to be good for consumers, the fact be is, and the reality is, that the banks want to cut the numbers of ATMs in the community because people are using them less for cash. They don’t need to with tap and go cards.

There’s other aspects of this is also things like, for example, Apple Pay. Three of our big four banks now do not still, even today, allow consumers to use Apple Pay to tap and go with your phone. Only one does, that’s the ANZ. As I said, on the wake of all of these, there was actually an important speech given today by George Frazis, who was the Chief executive of Westpac’s consumer bank. He gave this to the Trans-Tasman Institute.

Now, the interesting point about this is, he said, “Remember Selfridges– one of the great retailers of the UK, still there now. He says, “The mantra of Henry Gordon Selfridge was that the customer is always right.” He says also, the second part about it is, that there is a digital revolution happening right now. The people really right now are using technology more than ever before.

He goes on and talks about banks’ culture and says that really banks probably have not done enough to go to that whole issue of trust. He says, “Trust is key.” In New Zealand, it seems the people right now, and they haven’t had the same scandals as Australia’s had, to be honest, they have more trust in their banking system than what we have here in Australia. Let’s get the Chief Executive of Westpac’s consumer bank, George Frazis, on the line right now. Many thanks for your time, George.

Interview with George Frazis, CEO, Westpac Consumer Bank (ASX:WBC)

George Frazis: Thank you, Ross. It’s great to be on your program.

Ross Greenwood:  Today, you’ve also announced that you’re going to take a knife to transaction fees and allow people for less money to be able to open up their transactions as often as they possibly want to. Why have you done that?

George Frazis:  Ross, yes. This is quite an exciting and important announcement because, basically if you look at customer behavior, mobile banking has really transformed that and changed that. Effectively, we had legacy products that didn’t take that into account. What we’ve done is, basically made all of our transaction accounts across personal banking unlimited, in terms of transaction accounts and free for each transaction. We’ve capped the monthly account fee to no more than $5 a month. This is going to benefit in of about 1.3 million of our customers, which is just a great outcome.

Ross Greenwood:  Just explain how much that is going to cost the bank because that’s revenue foregone. If you’ve got 1.3 million customers, that’s 60 bucks, I’m presuming a $10 a month at the moment, those cost for those accounts. Is that pretty rough?

George Frazis:  Some accounts could be up to about $15 a month.

Ross Greenwood:  $10 to $15, with the average amount of $10, 1.3 at 60, that’s a month, that’s a hundred– that’s 60 bucks per year. 60 bucks times 1.3 million, that’s the best part. We’re getting out towards 70 million bucks for that.

George Frazis:  Look, Ross, this was a significant decision by us. Obviously, I can’t–

Ross Greenwood:  Is my math right there though George, is right with the maths, isn’t it?

George Frazis:  I can’t disclose the amount but what’s important–

Ross Greenwood:  I can do the math. I just did the maths for you. It’s about that, isn’t it?

George Frazis:  Look, I can’t disclose the amount.


George Frazis:  What I can say, Ross, is that, from my perspective, if you look at customers that interact more with us, they actually like us more. There’s a greater amount of trust. This is, in the long run, a win-win for the customer and ourselves. I think it’s an important step and there’s no doubt, 1.3 million customers as of the first of November will be saving money as a result of this.

Ross Greenwood:  All right. The second question that a cynic would ask, and I’ll be the cynic in this particular case, is you can do it now, why couldn’t you have done it 12 months ago, two year ago, three years ago?

George Frazis:  What we started is a process about two years ago, Ross, when we’re looking at this issue of trust and the lack of trust to systematically go through all our products and processes. This is a four-year program, where we’re reviewing all of those. Our blends is, what’s right for the customer and certainly what’s the right thing in terms of conduct, given today’s standards in the community. We’re systematically going through those.

Ross Greenwood:  What you’re basically saying to me there George, it’s a bit like, the ATM thing. The reason why the banks could afford to scrap the $2 fee if I use say, for example, I’m a Westpac customer and I use a Commonwealth Bank ATM, $2 to me. The truth is, if you can actually cut the number of ATMs in the global population, you’re going to save more, and you would have worked this out.

If I go and use the Commonwealth and you can actually kill off your ATM in my suburb, then that makes it actually cheaper for you to run the overall network. Given the fact that people are using less cash and more electronic devices to pay, quite clearly, your costs are coming down from a total population because there’s more electronics being used. That’s reasonable to say that, isn’t it?

George Frazis:  Look, Ross, there’s no doubt the use of cash is coming down. In a perverse way, the removal of that $2 fee probably will increase cash because effectively, it makes it much more convenient. This was not really an economic decision. What this was all about was a fee that was particularly hated by customers. Effectively, by removing that fee, it increases the flexibility customers have. It also benefits all customers around Australia, particularly those in regional and rural areas where there weren’t a lot of ATMs, and the distance travelled was a lot longer. That really was the driver.

Ross Greenwood:  You talked about the fact that you want to try and rebuild the trust in customers, one customer at a time. The interesting side about this is, broadly most of the scandals that have hit the banking sector, Westpac hasn’t really been at the forefront of most of those scandals. Why is it that you believe, as a bank, that Westpac needs to regain the trust?

George Frazis:  Look, as the CEO of the consumer bank, the fact that there is a lack of trust with the banking system, even with the customers that rely and deal with us the most, is a concern for me. It’s something that we systematically have to rebuild. It’s an element of a lack of trust for their customers, but it’s also an issue that we’ve got to rebuild trust with the regulators and government. My concern around this is, this lack of trust means that it does risk our economic prosperity. We need strong, stable, well-capitalized banks that are focused on their customers, focused on customer service to ensure that the 25 to 26 years of economic prosperity that we’ve had, continue on.

Ross Greenwood:  The other thing you said today that I thought was important for customers to understand, this is where that trust, that notion of trust being rebuilt is important. If we mess up something, we will put it right. That means, if we find a problem, we will fix it. Therefore, if I come to you and I have a fundamental problem with something that’s happened in the banking accounts, or I’ve been overcharged or something along those lines, what you’re saying is that Westpac would fix that?

George Frazis:  That’s absolutely right. Our mantra is, not that we’re not going to find things that are wrong, but the minute we find it our objective is to fix it. There’s a number of initiatives that we’ve put in place to do that. Number one, I meet with my executive team every week to go through customer complaints, to work out how do we actually deal to those. We also have, now, a customer advocate that has a fresh look at particularly a long-dated customer issues.

The other key thing, Ross, is that at the branch level, what we’re giving is authority to our bankers to deal directly with customer issues and complaints there and there so they’re resolved quickly. The biggest complaint customers have had is how long it takes sometimes to resolve it. Also, that they feel that there’s a power difference between the bank and ourselves. They’re the type of things we want to break down.

Ross Greenwood:  Just one thing for you though, George. One of the things that’s really sensitive for a bank right now is, obviously, you can see it through the numbers that the number of new home loans coming through and even refinancing, it’s not moving as fast through the banking industry as it once was. Everybody’s scrambling for market share. You can surely see that’s out there right now. Problem is, if you’re all trying to grab market share, you have to be very careful because everybody understands the stress testing that needs to be done in case interest rates would arise in Australia, which many people believe, inevitably, they will over time.

This goes to the whole notion of responsible lending. I’ll go to that point about the problems because you, as a banker at some point, if interest rates were to rise, will have to confront people with loans that might have trouble repaying those loans. You might have to go to somebody and say, “You might have to sell it.” There might be negative equity. This is the hard part of about being a banker when somebody is in difficulty and has to be put through by the bank.

George Frazis:  Yes, Ross, that’s an important point you raise. It’s important for your listeners to understand. We’ve been around for 200 years as Westpac. Our objective is a long-term one. Our absolute focus is making sure that we’re doing the right thing by the customer. It’s in the customer’s interest and ourselves, to ensure that the customers are not in too much debt.

The other thing to note is when we assess your ability, your affordability of a home loan, we add in the order of 2.25% interest rate increase on that loan to make sure you’re able to expand that. There’s a whole lot of other checks and balances about ensuring you’re able to afford that. Because what we want to do is ensure customers are able to keep their home and continue servicing the home loan and paying off their home loan, over the life of the home loan.

Ross Greenwood:  Just a final one. Are you as confident that mortgage brokers who these days are commonly used, and in fact account for around about half of all home loans written, are as diligent in doing those checks and balances as you are as a bank?

George Frazis:  Yes, when you look at our third-party channels and mortgages when it comes to serviceability, and what I’ve just discussed, this analysis and checks are done by the banks, right? We double check all of that analysis to ensure that the customer can afford that. Other examples are if you state your income level, we verify your income level to make sure that that’s correct. There are checks and balances for all of our channels.

Ross Greenwood:  I see, George Frazis, is chief executive of Westpac Consumer Bank. Appreciate your time here on the program tonight.

George Frazis:  Thanks, Ross. Thanks for your time.

Ross Greenwood:  Yes, thank you so much. George Frazis here.

Quick links to other related articles:

19-09-2017 Interviewed  Dave Curren, CIO, Westpac titled ” Are your skills up-to-date? ”.

17-07-2017 Interviewed  Robert Rennie, Chief Currency Strategist, Westpac titled ” Why is the Australia dollar rallying? ”.

26-06-2017 Interviewed  Brian Hartzer, CEO Westpac titled ” Westpac Boss: “South Australia’s Bank levy is double taxation and is a disgrace” ”.

22-05-2017 Interviewed  Peter King, Chief Financial Officer Westpac titled ” Westpac reveals the impact of the bank levy ”.

08-05-2017 Interviewed  Brian Hartzer, CEO Westpac titled ” Westpac CEO Brian Hartzer Half Year Results 2017 ”.

17-03-2017 Interviewed  Andrew Willink, Founder RateCity, Canstar and co-founder MoneyAction titled ” Banks raise home loan interest rates – Andrew Willink ”.

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