6. Finance

Regulatory grid for financial services

Context

6.1Four main regulators operate in the financial system in Australia, each with a distinct role and mandate: the Australian Prudential Regulation Authority (APRA), the Australian Securities & Investments Commission (ASIC), the Reserve Bank of Australia (RBA) and the Treasury. These four bodies comprise the Council of Financial Regulators (CFR).

6.2Due to the importance and complexity of ensuring stability in Australia’s financial system, the sector is subject to considerable regulatory intervention. Regulatory costs for firms in the financial industry include training and recruiting staff in compliance, specialised technology and software, legal expenses, audit and reporting costs, and documentation and record-keeping.

6.3While regulators can reduce the cost of regulation through proportionality—tailoring regulatory requirements to a firm’s size, systemic importance, complexity and risk profile—the amount of regulatory change in the sector continues to grow as the risk environment becomes more complex and dynamic. Banks in particular ‘sit in the middle of a lot of regulation’, with the extended regulatory landscape also including the Australian Taxation Office (ATO) and the Australian Transactions Reports and Analysis Centre (AUSTRAC).[1]

An Australian regulatory roadmap

6.4A number of witnesses supported the introduction of an Australian regulatory ‘roadmap’ that would provide more certainty for industry.

6.5A roadmap would be a coordinated strategic plan that outlines the timeline, milestones and key steps for the development, implementation and enforcement of emerging regulatory issues across the industry. While inquiry witnesses wholly accepted that regulation served an important purpose, they generally saw the current regulatory approach as needing greater coordination and visibility—to support stakeholders, facilitate competition and encourage innovation.

6.6Similarly, the banking sector overwhelmingly supported a regulatory ‘roadmap’.

6.7Witnesses referenced the UK’s Regulatory Initiatives Grid (‘the Grid’) as a leading model for consideration. The Grid was introduced in 2020 and sets out a two-year regulatory pipeline for the financial services sector. The Grid is published twice a year to help firms plan for, implement, and manage upcoming regulatory initiatives that may have a significant operational impact on them.[2]

Benefits

6.8In its discussions with the banking sector and industry peak bodies, the Committee explored the pros and cons of implementing a regulatory roadmap. The concept enjoyed broad support across the industry.

6.9The Australian Banking Association (ABA) has discussed a regulatory roadmap in depth with its UK counterparts (based on their experience with the Grid). The ABA told the Committee that the key benefits of the roadmap concept were the visibility it gave all participants of upcoming regulatory changes, and that it enabled regulators to prioritise and phase in potentially overlapping reforms.[3] The ABA said that while knowing about upcoming regulations and proposals was important, the sheer volume of regulatory initiatives meant it could be difficult to prioritise them:

There are 130 new initiatives here for consideration in the next 12 to 18 months. These are all live. Some of these things will lead to a reduction in some of the regulatory burden, where it is appropriate. Many of them are very good proposals. Many of them are things that the industry would support. The prospect of trying to deal with them well at this pace, we think makes it impossible for the sector as a whole, and for government, to really identify which of the 130 should be the top 10 that people put their real effort into. Which ones more logically should come after those top 10? Which make sense to implement one after the other after the other?[4]

Smaller and customer-owned banks

6.10Hearing the perspective of customer-owned and non-major banks was important, because they are disproportionately affected by the compliance burden of regulation. The Committee heard that a regulatory roadmap could improve the ability of smaller entities to compete. This greater competition would, in the view of many witnesses, by extension benefit consumers through more innovative and competitive products and enhanced economic dynamism.

6.11The view of the Customer Owned Banking Association (COBA) was that a roadmap was necessary to reduce regulatory costs, which limit the ability of its members to grow by ‘diverting funding away from growth initiatives’.[5] For customer-owned banks—in contrast to for-profit banks with larger operations and resources—this can result in smaller retained earnings, because of the need to underpin loan growth in line with APRA’s capital requirements.[6]

6.12BankWAW told the Committee that 80 per cent of the new roles in its business of 90 people were related to supporting risk and regulatory frameworks. For BankWAW, it was ‘challenging’ to simultaneously grow and invest in its network, develop competitive services and products for customers, and meet high regulatory and compliance standards.[7]

6.13The customer-owned Bank Australia told the Committee that a more coordinated regulatory approach, through a roadmap, could ensure that smaller entities continue to provide a competitive alternative to the major banks.[8]

Larger banks

6.14Larger banks, overall, also supported the concept of a regulatory roadmap.

6.15Westpac saw a whole-of-community benefit to the better sequencing that a roadmap would bring:

We would certainly encourage the Government and the Treasury department to stand back and look at the combined impact and sequence it so that we can deliver the best prioritised initiatives for the community. Everything has merit, but, when you stand back and look at it, not from an individual regulator perspective but from a whole-of-community perspective, you might make a different choice about the sequencing of and the speed at which you do different regulations.[9]

6.16Macquarie Group said that a roadmap made sense in an environment of quickly evolving regulation, where it becomes ‘very hard to plan things, automate…’ and it is difficult for new entrants to compete and be innovative.[10]

Insurance industry

6.17The Insurance Council of Australia (ICA), in its December 2022 submission to the Productivity Commission’s 2023 Productivity inquiry, similarly advocated for a regulatory grid. The submission also referenced the UK’s Grid as a useful model, noting that this more transparent policy framework with clearly articulated expectations would ultimately benefit consumers, industry and community alike by targeting policy and regulatory resources to more clearly defined areas of consumer and economic benefit. More specifically, it would also assist insurers who operate in an increasingly volatile business environment due to more frequent extreme weather events.[11]

Keeping consumers safe

6.18Another driver of a regulatory roadmap was the need for collaboration between government and the banking industry to enhance customer safety, but without increasing the regulatory burden—particularly in the payments sector. ANZ, for example, raised the immediate challenges posed by scams, frauds, and cyber threats, and the need for coordinated efforts by the banking sector (better enabled by a roadmap) to address these issues collectively.[12]

Implementation

6.19While witnesses acknowledged that Australia’s financial regulators already develop their own priorities and collaborate, implementing a regulatory roadmap would make this practice a formal requirement.

6.20The Committee inquired into which agency was best suited to lead the implementation of a regulatory roadmap.

6.21The ABA viewed the Council of Financial Regulators (CFR) as the ‘best place to start’, but equally saw Treasury as able to ‘play the same role’.[13]

6.22The ABA added that other agencies that are not financial regulators but contribute to the broader regulatory environment, should thus also play a role in the process—for example the Australian Taxation Office (ATO) and the Australian Financial Complaints Authority (AFCA):

…there are other arms of government that are not financial services regulators as such but have a lot of activity that impacts on them, such as the ATO, Treasury and AFCA—which is not a regulator but a complaints authority. Nevertheless, it issues draft guidance that's important for banks and others to respond to. There are a number of other arms of government involved—the review of the privacy legislation, for example, or the AML legislation review that is coming out of the Attorney-General's Department.[14]

6.23The Committee also heard that the ACCC should have greater involvement with the CFR to ensure competition was adequately considered in the regulatory environment. While the ACCC is not a member of the CFR (which comprises APRA, ASIC, the RBA and Treasury), it has been invited to participate in issues relating to contestability and competitiveness.[15] By contrast, the ACCC’s UK counterpart, the Competition and Markets Authority, is a full member of the Financial Services Regulatory Initiatives Forum.

6.24In this light, Bendigo and Adelaide Bank told the Committee that:

To have the ACCC at that table on a regular basis would be really beneficial to ensure that competition is also thought of…[16]

Committee comment

6.25The Committee acknowledges that the stability and safety of the financial system is essential to the wellbeing of Australians. However, the pace and scale of regulatory reform in the financial sector to ensure stability is potentially inhibiting greater competitiveness and innovation. The considerable amount and complexity of regulatory intervention imposes material costs on the sector and consumers. Without appropriate coordination, well-intended reforms can hinder economic dynamism and regulatory effectiveness and have a disproportionate impact on smaller organisations and their ability to compete.

6.26The Committee notes there is wide-ranging support from across the banking and insurance sectors for the implementation of a regulatory roadmap to better coordinate the efforts of Australia’s financial regulators.

6.27The Committee supports the implementation of a high-level roadmap setting out planned legislation and regulatory interventions. The enhanced visibility and coordination that a roadmap would bring would assist industry in meeting its obligations, benefit competition, and support better outcomes for consumers.

6.28That the Government develop a fit for purpose ‘regulatory grid’ to provide greater visibility and coordination of regulatory interventions across the financial services sector.

Banks and mortgages

Measures of bank profitability

Net Interest margins (NIMs) and Returns on Equity (ROE)

6.29Australia’s banking sector is generally considered to be highly concentrated. It is dominated by the ‘Big Four’—Westpac Banking Corporation (WBC), National Australia Bank (NAB), the Commonwealth Bank of Australia (CBA), and the Australia and New Zealand Banking Group Limited (ANZ).

6.30When considering how much market power the Big Four exercise in Australia and the implications for the home loan sector, a useful starting point is to consider the two main measures of bank returns (or profitability)— net interest margin (NIM) and return on equity (ROE).

Net Interest margins (NIMs)

6.31The NIM measures the difference between the interest income generated by banks or other financial institutions and the amount of interest paid out to depositors, relative to the amount of interest-earning assets.

6.32Since 2005, there has been a long-term downwards trend in the average NIMs of Australian Authorised Deposit-taking Institutions (ADIs). Figure 6.1 (below), based on data from APRA, demonstrates this.

Source: APRA, Answer to Question on Notice, APRA-ED01QON, p. 2.

6.33APRA analysis of the NIM data notes two key issues:

• Reductions in the average NIM of Australian ADIs over the past 20 years reflects ‘a combination of increased competition from within the sector and from non-ADIs, and the declining trend of interest rates over the period’.[17]
• The increase in average NIMs since June 2022 has coincided with interest rate rises.[18]
  34. Reserve Bank of Australia (RBA) research from 2021 suggests that NIMs may have a modest positive correlation to policy rates in the short term because interest rates on some liabilities (e.g. term deposits) may not adjust as quickly as interest rates on assets (e.g. mortgages). There is not a clear relationship over the long run.[19]
  35. When asked by the Committee how Australian NIM trends compare internationally, APRA was cautious. It noted simply that average NIM rates of New Zealand banks had similarly reduced over the past two decades, though with an earlier uptick (in late 2021) than Australia, coinciding with increases in the cash rate by the Reserve Bank of New Zealand at that time. The average NIM of Canadian banks has also reduced over the past decade.[20]
  36. The annualised NIM for Australia’s Big Four banks from 2000 to 2023, including year-on-year declines (on average) and a recent upswing, is shown in Figure 7 below. Accompanying commentary from KPMG states that:

Net interest margins across the Major Banks continued to increase in FY23 by an average of 9 basis points compared with FY22. This is a result of improved interest earned on the loan portfolio driven by cash rate increases during the last 12 months. While net interest income has increased by 12.7 per cent compared to FY22 to $74.8 billion, interest expense has increased by 504 per cent compared to FY22.[21]

Source: KPMG, Major Australian Banks: Full Year 2023 Results Analysis

6.37In its 2023 Retail Deposits Inquiry, the Australian Competition and Consumer Commission (ACCC) offered the following analysis regarding the relationship between competition and NIMs.

In recent years, some major banks have argued that declining net interest margins (NIMs) of the past 25 years are an indicator of strong competition in the market. However, as discussed below, there are many factors that can impact NIM and their relationship with competition is not clear. A declining NIM is not in itself evidence of strong competition in the retail deposits market, or even across deposit and lending markets.

…

It is also useful to note that this measure relates to performance at an entity level, rather than a specific product segment, such as retail deposit products.

…

The ACCC considers that there are several factors that may be contributing to the reduction in NIMs, of which competition may be one. The recent low interest rate environment, from the onset of the COVID-19 pandemic up until 2022, is another factor that may have contributed. Now that the low interest rate environment has passed, we have seen some increase in the NIM since 2022.[22]

Return on Equity (ROE)

6.38The ROE calculates the return that a company is able to generate with its shareholders’ equity—in other words how efficiently a firm uses its equity financing to generate income. The metric can incorporate many inputs, including ‘…incomes, expenses, and certain balance sheet components’.[23]

6.39The long term downwards trend of the ROE of Australian ADIs since 2014, based on data from APRA data is shown in Figure 6.3 below.

Source: APRA, Answer to Question on Notice, APRA-ED01QON, p. 3.

6.40APRA analysis of these ROE trends is:

ROE for Australian banks has broadly declined since 2010. It reached a low point of around 6.2 per cent in 2020-2021 as a result of pandemic related provision increases. There has been an improvement in profitability over the past two years as those provisions were released.[24]

6.41Additionally, it is important to note that ROE is not calculated in a standardised way. APRA advised the Committee that it ‘…does not collect data to calculate ROE on a disaggregated basis that would allow for accurate product-level ROE analysis’.[25]

…often costs can be hard to attribute because you've got shared services that may be cross multiple products. Investment in cyber resilience, for example, might be something you've got to make decisions to attribute. Although minimum capital requirements will be set asset class by asset class, banks will then determine an overall buffer that they'll maintain for their actual capital levels over and above regulatory minimum. Again, there's a decision you have to make, a judgement you have to make, as to how you attribute that.[26]

6.42For a bank, the ROE can be assessed either on the bank’s entire portfolio or on sub-components, such as residential mortgage loans.

6.43The annualised ROE for the Big Four banks between 2020 and 2023, displaying year-on-year increases (on average), is shown in Figure 9 below. Accompanying commentary from KPMG states that:

Return on Equity (ROE) continued an upward trend in FY23 across the Majors. Average ROE increased by 85 basis points compared with FY22 to 11.7%, continuing the momentum from last year's ROE.[27]

Source: KPMG, Major Australian Banks: Full Year 2023 Results Analysis

Different Approaches to Improving Competition

6.44Even though the market share of the Big Four banks is large, there are some signs of competitive tension. These include:

• Falling NIMs and ROEs (albeit these measures must be interpreted with care).
• Increased rates of customer churn over the past 18 months (though these rates could decrease if interest rates fall).
• Innovative product offerings and services from smaller and customer owned banks.
  45. Improving the level of competition in Australia’s banking sector is critical to improving the overall dynamism of the economy and for improving outcomes for consumers and business. There are three broad strategies for improving competition:

1removing barriers for new entrants

2increasing consumer churn and switching

3facilitating products that provide good outcomes for disengaged consumers.

6.46These will be addressed in turn.

A Public Residential Backed Mortgage Securities Market?

Context

6.47One barrier to competition in mortgages is access to funding for smaller banks that offer home loan products, in particular customer-owned banks, a point made by several witnesses.

6.48Smaller and customer-owned banks told the Committee that their profitability was considerably lower than the Big Four and reflected in part their comparative lack of scale and diversification.

6.49Great Southern Bank advised that ‘…the return on equities (ROEs) of customer-owned banks, or certainly in our case, are around five per cent. For one of the big four retail banks it would be double that at least. For Net Interest Margin (NIM)…there’d be a 30 to 40 basis point differential’.[28]

6.50A major reason given for this difference in profitability was the high fixed costs in the banking sector, and the relative disadvantage of smaller banks in their capacity to absorb the costs of regulatory compliance. Customer-owned banks, which generally focus on residential mortgages, have higher cost-to-income ratios and lack the extra income sources of the major banks through their more diversified business models. Additionally, higher relative compliance costs can adversely affect the ability of smaller banks to deliver on a key point of competitive difference—their direct interaction with customers, a point made by Toowoomba-based Heritage and People’s Choice Ltd Bank.[29]

6.51Another disadvantage for smaller banks is that they generally face higher funding costs because credit markets perceive them as a higher risk than the Big Four.

6.52Given the disparity in profitability and underlying risk between large and smaller banks, the Committee sought to explore the potential for government backed bonds (public securitisation) as a way to lower borrowing costs for smaller lenders and thus boost competition in the mortgage sector.

6.53Mr Greg Medcraft— Chair of the Australian Finance Group and formerly Chair of ASIC and a senior official at the OECD—told the Committee that the big banks’ greater profitability, their lower capital costs, and the ‘implicit government guarantee protecting the savings of their customers’ translated into considerable market power and therefore advantage over smaller competitors in the mortgage sector.[30]

6.54Residential mortgage-backed securities have allowed smaller lenders to compete with large institutions by rolling up home loans into bonds and selling them to investors.

6.55In a 2012 speech, ASIC’s Greg Tanzer stated that ‘the Government also recognises the importance of securitisation as a source of funding to smaller lenders, whose presence in the residential mortgage market assists in maintaining interest rates at competitive levels to enable more Australians to own homes’.[31]

The Canadian model

6.56Canada—like Australia—has a concentrated banking system, with six large banks. The Canadian Government invests in some residential mortgage-backed securities (RMBS), which reduces the costs of accessing funding for all banks but disproportionately so for smaller banks. Through this public securitisation of mortgages, Canada has a lower spread between bank deposit and lending rates, i.e. a smaller margin between the interest rate banks charge on loans versus the interest rate banks pay out to depositors. In 2019, Canada’s spread was at 2.5 per cent, with Australia’s at 3.5 per cent.[32]

6.57In this vein, the Committee heard in depth from Mr Medcraft (see above), who has argued for introducing a RMBS scheme in Australia, based on the Canadian model.

6.58Mr Medcraft explained to the Committee the concept of a private RMBS:

A bank or a non-bank takes a pool of diversified mortgages and sells that pool to a special purpose vehicle. The special purpose vehicle gets a credit rating from the rating agencies and is able to issue bonds that are tiered, base AAA down through the slicing of the risk. Those bonds are then pricedand issued to institutions.[33]

6.59Mr Medcraft then expanded on how the Canadian public model works. He said that a lender might be a credit union, for example, that lodges a pool of mortgages with the Canada Mortgage and Housing Corporation. The corporation checks eligibility and then issues a ‘national housing security’ that is wrapped by the Canadian Government.[34]

6.60The Canadian scheme, Mr Medcraft stated, was safe, affordable, and had stood the test of time. It has operated for 35 years, with an independent review by the Canadian central bank finding that it had supported competition in the mortgage market while also preserving its stability—by providing access to funding to smaller lenders ‘…through a stable, cost-effective supply of funding’. It had adapted the Fannie May and Freddie Mac mortgage models in the US and ‘…made them far better from a sharing of risk perspective’.

In Canada…the maximum mortgage loan-to-value ratio is 80 per cent, so it is aimed at prime mortgages…On top of that, every mortgage has to be mortgage insured by a single-A rated mortgage insurer. Then you have the capital of the mortgage insurer protecting the situation. Then you have a third situation, which is that all the fees chargedby theCanadians—they arequite low, at fivebasis points per annum—go into a reserveandare available so that, if there ever was a call on the guarantee, they would cover that. So it is pretty efficient and has stood the test of time.[35]

6.61Introducing such a matched funding model in Australia, Mr Medcraft believed, would provide multiple benefits.

…firstly, provide more competition and choice, creating a more level playing field between the big banks and the smaller players; and, secondly, result in lower interest rates for home buyers, with a reduction in both fixed and floating rate variable mortgages. It would also give those non-banks access to lower fixed rates, most importantly. Thirdly, it would result in less volatility in mortgage rates by stabilising funding margins. Fourthly, it would lower systemic risk for Australian lenders because it would enable matched funding through government supported mortgage bonds. Fifthly, it would improve liquidity access across the Australian market from a larger and more globally diversified investor base. Sixthly, it would reduce the liquidity costs for banks, as government-supported mortgages can be used forliquidity with the central bank. Lastly, obviously, they could be a new source of investment, providingopportunity for wholesale and retail investors.[36]

6.62The Committee sought the ABA’s view on Mr Medcraft’s proposed RMBS model. The ABA cautioned that something that worked in a foreign jurisdiction wouldn’t necessarily work in the Australian context. However, the ABA was enthusiastic about considering the proposal in more depth, given that anything which lowers funding costs for Australian banks would in turn reduce the costs that were passed on to customers.[37]

Switching Mortgages

6.63The Australian mortgage market has very high rates of variable rate mortgages by international standards.

6.64And, as former ACCC Chair Professor Allan Fels has pointed out, as interest rates have increased, banks have wound back programs that try to win over rivals’ customers through refinancing.[38]

6.65Mr Medcraft told the Committee that given the big banks’ access to deeper pools of deposits and with lower capital costs, the big banks can charge existing customers (the ‘back book’) higher interest rates on their mortgages. This greater revenue is then used to offer ‘discounts and cash-backs’ to attract new customers (the ‘front book’), who can eventually be converted to paying higher rates. Smaller banks, meanwhile, do not have the scale to compete with these tactics and risk being squeezed out of the market, thus reducing ‘…choice and competition for Australian borrowers’.[39]

6.66The price differential between customers on the ‘back book’ and new customers (the ‘front book’) is often referred to as the ‘loyalty tax’. To the extent this is occurring it would represent a form of price discrimination.

6.67Price discrimination is a pricing strategy in which identical or largely similar goods or services are sold at different prices by the same firm to different consumers. Price discrimination will result in higher prices for some customers.

6.68First degree price discrimination involves personalised pricing or selling to each customer at a different price. For first degree price discrimination to occur:

• The firm must have market power (either monopolistic or oligopolistic). This market power is not just a question of market share, but can manifest itself through consumer disengagement. If a consumer doesn’t shop around and the firm knows this, it will present an opportunity for a firm to test prices higher than the market equilibrium—e.g. not offering the consumer the current (lower) rate for new clients.
• The seller must know the price that the consumer is willing to pay.
• The good or service must be non-transferable (otherwise the consumer could buy from another consumer at a lower price).
  69. In the case of residential mortgages, these features are at least partially present for most consumers.
  70. Even though rates of engagement have increased over the past 18 months, there remains a large cohort of passive, disengaged consumers who are at risk of being charged interest rates above the rate they could achieve if they sought a better deal from their own bank or a rival bank.
  71. Switching accounts and associated behaviours has also been the subject of much study in the UK.
  72. In 2018, the UK’s Financial Conduct Authority (FCA) completed a study into behavioural prompts. The study noted the potential effectiveness of switching prompts in influencing consumers’ thinking or behaviour. It found that effective prompts can increase consumers’ awareness of account features, fees and charges, for both their own accounts and others.[40]
  73. Separately, in 2016 the UK’s Competition and Markets Authority found that ‘the older and larger banks, which still account for the large majority of the retail banking market, do not have to work hard enough to win and retain customers and it is difficult for new and smaller providers to attract customers. These failings are having a pronounced effect on certain groups of customers, particularly overdraft users and smaller businesses’.[41]

ACCC Home Loans

6.74In 2020, the ACCC completed an inquiry into home loans. It found that the longer people had been with their bank, the higher the interest rate they were generally paying.It found there was a positive correlation between variable interest rates and the length of the loan. In other words, mortgage holders who had been with the same bank for a long time ‘typically pay…materially higher rates’, in effect a ‘loyalty tax’—a trend that has been apparent since 2015.[42]

6.75The ACCC’s final report found that, as at September 2020, borrowers with home loans between three and five years old paid on average about 58 basis points more than the average interest rate paid for new loans.[43]

6.76Further, it found that borrowers with loans more than 10 years old were, on average, paying approximately 104 basis points more than the average interest rate paid for new loans. It outlined that a borrower with a home loan of $250,000 could save more than $1,400 in interest in the first year by switching to a loan with the lower, average interest rate paid for new loans. Over the remaining term of the loan, that borrower could save more than $17,000 in interest.[44]

6.77Logically, the reverse might have been expected—i.e. that customers with longer lived loans would generally have higher rates of equity, and that the bank would know more about their risk profile and that they should be eligible for a lower interest rate.

6.78The ACCC inquiry attributed this counter-intuitive trend to a lack of engagement in the mortgage market from these long-term customers (‘customer inertia’). It found that had this cohort been more aware of the significant savings available on new loans, many may have switched lenders or home loan products, or asked their existing lender for a rate similar to those available for new loans. This would have resulted in fewer mortgages with interest rates substantially higher than the average rate for new home loans.[45]

6.79To trigger greater engagement from such customers and to stimulate dynamism in the home loan market, the ACCC inquiry recommended an annual notification be sent to customers on variable rates—prompting them to consider whether they could benefit from changing lenders. To reduce the friction involved in switching lenders, the inquiry proposed standardising and simplifying mortgage release forms.[46]

A changed environment?

6.80Notwithstanding the ACCC’s findings in 2020, the number of borrowers negotiating a reduction in their rate has grown substantially since, as rising interest rates have increased the salience of the issue.

6.81The ABA told the Committee that competition was now ‘thriving’ in the mortgage market.

…with customers switching bank products at record levels, driven by a desire for better prices, particularly in the inflationary environment. In the last financial year [FY 2022-23], nearly 650,000 mortgages worth $376 billion were refinanced, the highest ever on record.[47]

6.82Overall, the major banks were sceptical that there was still customer inertia regarding their mortgages and questioned the need for behavioural prods to prompt customers to consider switching accounts, as proposed in the ACCC inquiry.

6.83NAB pointed to significant changes in the market since 2020. At that time, 80-85 per cent of mortgages had been at standard variable rates but there had since been a ‘dramatic’ shift to fixed rates, reflecting rising interest rates and greater customer engagement. Additionally, ‘offer management’ had become simpler for customers, with the gathering of data for a home loan assessment for straightforward customers now occurring quickly.[48]

6.84ANZ warned of the risk of unintended consequences of an annual prompt from banks to home loan customers. For example, someone who is prompted to re-finance but whose application is rejected on suitability grounds risks having a negative credit score.[49]

ACCC current view: Switching rates still a major concern

6.85The ACCC remains deeply concerned, however, that the rate of switching is lower than it could be.

6.86The final report of its Retail Deposits Inquiry,released in December 2023, clearly finds that ‘consumer engagement is low and comparing products can be challenging’ and that ‘consumers find it difficult to switch accounts, so most do not’.Its recommendations aim to ‘increase transparency’ in the market, ‘support more effective consumer engagement’, and ‘reduce barriers to consumer switching to drive competition’.[50] Notably, it recommends that:

• Banks should tell consumers directly when they change interest rates, and prompt them to consider switching for a better rate (Recommendation 5), and
• The Australian Government should review the merits of bank account portability (Recommendation 7), including that ‘the review should consider the likely costs, benefits, risks and opportunities that different approaches to bank account portability would present’.[51]

Tracker mortgages

6.87‘Tracker mortgages’, popular in the US, are variable rate mortgages that automatically move with the cash rate (or a related measure of bank funding) set by a country’s central bank.

6.88ASIC has long supported tracker mortgages. In 2016, it stated that ‘While the introduction of tracker mortgages is a decision for the lenders themselves, ASIC would encourage lenders to offer this product. Tracker mortgages would bring a number of benefits to consumers and overcome some perceived issues in variable rate home loans currently on offer. No law reform would be required for lenders to introduce tracker loans’.[52]

6.89One of the advantages of tracker mortgages is that they reduce the likelihood of disengaged consumers drifting away from the best available rate.

6.90The Chair of ASIC in 2016, Mr Greg Medcraft, advocated strongly for tracker mortgages at the time, arguing that bank funding costs track very closely with the cash rate. He said that rate tracker mortgages would benefit banks that routinely face customer backlash every time they do not pass on the rate cut.

6.91The Committee sought Mr Medcraft’s current views on whether tracker mortgages were applicable to Australia and could result in more transparent home loan rates.

6.92Mr Medcraft told the Committee that the opaqueness of the mortgage market in Australia was a major problem. On offer were ‘thousands of different rates about which nobody has any idea’, indicative rates that vary, and additional discount mortgages ‘that people don’t know about’. As a transparency measure, therefore, tracker mortgages based on a margin above the cash rate were ‘really the only fair way forward’. Mr Medcraft believed that banks might find the flexibility of tracker mortgages appealing because the mechanism could be reviewed regularly. Additionally, there was scope to trial the public securitisation of mortgages (see RMBS section above) based on tracker rates.[53]

6.93As for appropriate regulatory measures for tracker mortgages, Mr Medcraft pointed to Ireland and the United Kingdom, which have both used the mechanism.[54]

6.94Some of the Big Four banks have expressed concern about tracker mortgages.

6.95When appearing before the House of Representatives Economics Committee in October 2016, CBA, NAB and Westpac said that when interest rates were rising the measure could be a risk to a bank and to the stability of the financial system—when funding costs are increasing but banks are unable to reprice their loans. NAB had added that its substantial holding of funds offshore was not linked to the cash rate, which would add further complexity and risk to pricing of tracker mortgages.[55]

6.96ANZ said at the time that there was a ‘valid place’ for tracker mortgages.[56]

Other factors

6.97There has been a general failure of recent new entrants in the Australian banking sector, principally the neo-banks. Neo-banks are generally digital-only companies that offer services such as checking accounts and debit cards, but do not have a physical location.

6.98Mr Medcraft told the Committee that a lack of capital had been the key factor in the decline of neo-banks—specifically, these banks had used up all their capital before they were able to increase their scale.[57]

Committee comment

6.99The Committee notes the long-term reductions in NIM and ROE rates over the past 10-20 years as measures of reduced profitability in the banking industry over a very long timeframe. This was likely due to a mix of factors, including greater competition, improved technology which enabled increased customer engagement, and greater regulation to ensure the stability of the financial system.

6.100The Committee also notes the recent rise in NIM and ROE rates over the past one to two years, coinciding with higher interest rates and the economy’s emergence from the COVID pandemic. Consumer engagement with banks appeared to have increased during this time, particularly around mortgages, which had probably limited the size of the NIM and ROE increases.

6.101The Committee acknowledges that it is difficult to compare the profitability of Australian banks with international counterparts and across sectors, given difficulties in disaggregating ROE data, and because of very different circumstances across borders and industries.

6.102However, the Committee is troubled by the significant difference in profitability between the major banks and the smaller banks. Scale and diversification clearly confer significant advantages but the Committee also recognises the potential for major banks to leverage this scale to squeeze out competitors to the detriment of consumers, especially in the area of residential mortgages, and businesses. For smaller and customer-owned banks, the obligations of regulatory compliance could force them to direct resources away from areas of natural competitive advantage, such as customer service, innovation, and attractive product pricing. This situation does not reflect well on competition in Australia’s banking sector.

6.103While the Committee acknowledges the higher levels of engagement by mortgage holders with their banks, it remains concerned that engagement may fall away in the medium to long term. Accordingly, the Committee supports measures to institutionalise such customer engagement.

6.104The Committee also supports policy measures that facilitate new entrants to the sector or the growth of smaller banks.

6.105In this light, the Committee notes that people with tracker mortgages are at less risk of paying an interest rate above the best available rate at the time, even if they do not pay attention to the market.

6.106That the Treasury Competition Policy Taskforce examine mechanisms to increase consumer engagement with mortgages and deposit products. Initially, this could take the form of pilots of one or more of the following:

• A requirement that banks reach out to variable rate consumers with older home loans (3 or more years) once per year to review their product, prompting them to consider both price and non-price factors.
• A requirement that banks should notify the base interest rate at the end of the introductory period where a retail deposit product is offered.
• A requirement that banks should clearly notify retail deposit holders of changes to their interest rates, changes to the eligibility requirements for a bonus interest rate and, where practicable, alert customers when they are approaching a threshold for eligibility for a bonus interest rate (e.g. a minimum balance level).

That APRA provide an independent benchmark (or series of benchmarks) for variable rates for new/switching customers over the preceding 12 months. That this benchmark be published for use by mortgage brokers and financial advisers to improve their capacity to contact new clients to improve churn rates.

6.107That the Government examine the merits of adopting a government-backed Residential Mortgage-Backed Securities (RMBS) scheme, taking into account the characteristics, and evaluation, of the Canadian RMBS model.

6.108That the Australian Prudential Regulation Authority examine the suitability of macro prudential regulation of medium and smaller banks and, in particular, their capital holding requirements.

6.109That the Government explore cooperating with the banking sector in the development and evaluation of a pilot in relation to tracker mortgages.

Foreign exchange transfers

6.110Foreign exchange involves the process of converting one currency into another. It is a service facilitated by a range of providers including traditional banks, specialised money service businesses, and newer money transfer operators. This market is used by individual consumers and businesses requiring funds to be sent across borders.

6.111Providers compete to offer money transfer services, charging clients through commissions and flat fees, and offer exchange rates that may differ from their internal rates used for transactions.

Context

6.112In the past, the market for foreign exchange transfers has mainly been operated ‘by incumbent major banks, but digital and technology innovation has allowed the entry of global fintech’ which has brought about a ‘reduction of foreign exchange fees and transfers’.[58] In the words of the ACCC, these new entrants have been:

…making a material impact on competition—they were providing better and more innovative services and better prices, pretty much across the board.[59]

6.113In 2019, the ACCC issued best-practice guidance recommending money remitters make reliable online price calculators available to consumers and that they clearly disclose their prices, including all relevant fees allowing consumers to make better comparisons.[60]

Effects of the ACCC best-practice guidance and market transparency

6.114The Committee has received evidence indicating that the ACCC's recommendations have improved transparency in money transfers. This enhancement facilitates easy cost comparison across providers, thanks to embedded calculators within the system. CBA advised that:

The customer knows exactly how much they'll get. They can see the rate. They can do a comparison with other banks or they can go onto comparison sites. So we think actually the best thing from a customer's viewpoint is to know exactly how much they will get…or exactly how much they will get if they go to another provider.[61]

6.115In response to the Committee’s concern about why average charges from traditional banks are noticeably higher than those of some new entrants, NAB said that:

Some of it does come back to trust: do I trust the brand? I am sending money. Do I know it is going to get there? Are they going to back it up if it doesn't? It does come down to that. Trust in a brand is worth something. Some players who come into a market will cut the price down to get a foothold in to build over time. There were players in the UK where you would go in through the week and it was a cheap price and then you would go in at the weekend and the price of transfer had gone through the roof.[62]

Still a complex market where consumer choices are difficult

6.116Despite the increased competition in the money transfer market, the Committee has heard evidence about the lack of price transparency, which has made it difficult for consumers to understand the real costs from exchange money transfers.

6.117The World Bank has noted that the actual ‘charge’ consists of different elements, such as the commission and the exchange rate mark up. This makes the actual price a ‘shrouded attribute’ to consumers, where it is not clear which provider is offering the best deal.[63]

6.118Wise, a global payments company, highlighted that consumers are unaware of the true cost of transferring money due to hidden mark-ups in the sector. This inherent opacity keeps prices artificially high, as consumers cannot easily compare or choose between services based on price, preventing effective competition. Wise told the Committee that:

…in order for consumers to know exact prices and therefore have the urge to compare providers and international payments, we need price transparency… people should know what they are paying for an international transfer upfront and in full…Traditional financial institutions…still charge exorbitant fees…The effect of hiding these fees in a marked-up exchange rate is that customers remain unaware of the costs of their international transactions and consequently can't even begin the process of trying to find a better deal, because they don't have a prompt to do so.[64]

6.119Separately, Wise has provided more specific detail on the banks withholding relevant price information on money transfers from consumers.

A bank will say transferring $10,000 US to the US costs $0, but they fail to disclose that there’s a 3.6% mark-up over the mid-market rate, making the cost more like $572 AUD than “free’.[65]

6.120In response, the major banks claimed that their practices on money transfers were transparent, simple, and easily comparable for consumers.

6.121ANZ Bank told the Committee that:

The fees are very transparent. The rate itself is more complicated in the sense that sending $100 to the United States is a very different thing to what the foreign exchange mid-market rate refers to, which is pricing for people sending hundreds of millions of dollars and billions of dollars. So that's sort of a wholesale rate. I'm not sure that people would expect to get the wholesale rate. I'm not sure what the disclosure of that would actually achieve. What we do do is we disclose the exchange rate that you are receiving. People have access to the internet or the web. They can search all sorts of things to find comparison sites and to understand where there are better options, and people do.[66]

6.122Westpac highlighted simplicity, stating that:

The most important thing is just to make it simple. If you need to transfer a hundred dollars Kiwi to New Zealand, you need to know what it costs you in Australian dollars; or if you have a hundred dollars Australian, what it is going to become in New Zealand. Trying to break it down into the components is quite confusing.[67]

6.123Similarly, CBA’s response focused on simplicity. It told the Committee that:

…our experience with customers is they just want to know how many US dollars they will get for their A$100 and be able to compare that easily without having to make adjustments.[68]

Effects of hidden mark-ups (hidden fees)

6.124The Committee has heard evidence that the failure to provide adequate information has led to consumers and small businesses overpaying to make international payments. Wise, which has noted that ‘hidden fees’ disproportionately affect individuals with lower degrees of financial literacy as well as those in poverty, told the Committee that:

Traditional financial institutions—Australian banks—still charge exorbitant fees. These fees are hidden in uncompetitive and marked-up foreign exchange rates. The effect of hiding these fees in a marked-up exchange rate is that customers remain unaware of the costs of their international transactions and consequently can't even begin the process of trying to find a better deal, because they don't have a prompt to do so’.[69]

6.125The Committee is of the view that transparency in financial transactions enables consumers and business to make informed decisions, fostering competitive pricing and enhancing overall market effectiveness.

6.126That the Government explore mechanisms to make the spread and fees on foreign exchange transfers more transparent for customers.

Payments system

Context

6.127Australia has a world-leading financial technology (fintech) sector, which includes businesses such as digital banks, payments processing providers, and remittance and cryptocurrency services. Payment system providers are one of the largest fintech sectors, accounting for 38 per cent of Australian fintech companies.[70]

6.128Australia’s payment system continues to evolve in size and complexity, with new payment methods and innovative services being built on top of traditional payments infrastructure. Payment systems generally refers to arrangements and instruments that facilitate the transfer of funds. Participants have grown in number and variety, and incumbents are changing the way they operate in response to evolving consumer preferences and technological developments.[71] Australian consumers are increasingly embracing these digital payments and alternative payment methods, such as e-wallets and contactless payments.[72]

6.129The regulatory framework for payments systems—comprising of regulatory agencies such as the RBA and APRA—has remained relatively unchanged over the past 20 years.[73] The most recent review into the payments system was completed in 2021. Led by Scott Farrell, the Morrison Government requested the review to ensure the payments system was fit for purpose and that it supported continued innovation.[74]

6.130The Committee heard widespread support for the Farrell Review recommendations and the Government’s ensuing Strategic Plan for the Payments System, released in 2023.[75] While there was also support for the broader direction government was taking in improving the regulatory landscape around fintechs, unresolved core issues remained that related to business formation and competition—such as the licensing of payment system fintechs and de-banking.

A more flexible licensing regime?

The current system

6.131Regulation of banking provides stability and safety in a system that is essential to the welfare of Australians. An authorised deposit-taking institution (ADI) licence is required to conduct banking business in Australia. Because obtaining a licence entails significant resources and capabilities, APRA offers multiple pathways to obtain one, including restricting the number of ADIs to ensure sustainable business models.[76] However, the cost of complying with this regulation can be significant and have negative impacts on innovation, business formation, and competition provided by smaller or new businesses.[77]

6.132The issue of fintech licensing in the payment system sector was raised in the Farrell Review. The Review recommended that a single payments licensing framework be introduced, with separate authorisations for the provision of payment facilitation services and the provision of stored-value facilities, and two tiers of authorisation based on the scale of activity of the provider.[78]

Industry views

6.133Throughout the inquiry, the Committee explored the concept of a more flexible and less onerous licensing arrangement for participants in the payment system – one that offers appropriate protections for consumers, but also lowers barriers to entry for new businesses.

6.134Obtaining a licence is essential for fintechs seeking to grow, whether in Australia or in international markets. A licence provides credibility with investing partners, banking partners and customers. However, participants in the payments system industry held the general view that there was currently an ‘all-or-nothing’ approach to licensing. In other words, the licensing system was not flexible enough to cope with the pace of change and the diversity of risk exposure of entities across the sector.[79]

6.135FinTech Australia characterised the one-size-fits-all approach as ‘burdensome’ and stifling of the growth of new and emerging businesses. It suggested that a tiered payments licensing framework, with more tailored licences matched to the risk profiles and maturity of businesses, could promote economic dynamism by creating a regulatory environment that fostered innovation and new entrants.[80]

6.136Similarly, the Tech Council of Australia viewed the regulatory framework as not reflecting the needs of new and emerging service providers, such as fintechs, in growing their customer bases. A primary concern was that the framework often forces new entrants to cooperate with incumbents to obtain access to payment systems. This simply ‘consolidates the position of large incumbents rather than promoting competition and innovation’.[81]

6.137Wise, a global payments company, highlighted the burden of obtaining and maintaining a limited ADI licence as a barrier to entry.[82] Airwallex, a global payments and financial platform, saw the current regulation as a blunt instrument that heavily favours incumbents by treating payment system providers as if they posed a similar level of risk as banks. It told the Committee that:

The regulations treat payment companies like Airwallex as if they pose the same risks to customers as banks. To be clear, at Airwallex, I can go into more detail about this, but we don't lend out customer funds—we're purely a payment provider in that way. So these regulations are insanely out of step with the technological advances we've seen in the Australian economy and with the regulations that we see in other jurisdictions, such as the UK and Singapore. The only group that benefits from the current system are the incumbents. So we would urge this inquiry to look at ways that economic dynamism can be achieved while also boosting productivity and lowering cost for businesses and consumers by promoting competition.[83]

6.138Another licensing issue was the lack of a consistent definition of a ‘payments system’. Ezypay told the Committee that while the Farrell Review acknowledged this problem—by referencing ‘unnecessary complexity’ for new entrants that do not fit under ‘outdated’ regulatory definitions[84]—it remains the ‘biggest challenge at the moment’.[85]

6.139The Committee followed up the issue of flexible licensing requirements with the major banks, which cautioned that more flexibility in the system carried potential dangers. NAB said that a more flexible licensing regime with different prudential requirements across the sector created systemic risks.

I think we should have one set of rules for all, so that people know what the rules are. We've seen what happened in the US market very recently where there was a two-tier. It had lower regulation for the second tier. That second tier actually got itself into difficulty. You saw SVB get into difficulty because it didn't have the scrutiny that other big banks had. I think that is the danger of having two or three tiers of regulation in a marketplace.[86]

6.140Westpac said that any weaknesses in the payments architecture could be exploited by bad actors, such as scammers. It advocated instead for the establishment of a clear minimum standard for capital requirements and liabilities in payment systems.[87]

Regulators’ view

6.141The Committee asked APRA whether a more flexible licensing regime was possible. APRA stated that while the payments system was ‘very complicated’ due to its centrality to the efficiency of the financial sector, a number of financial system regulators supported making positive changes to the system.[88] It remains an ‘ongoing regulatory discussion’.[89]

International models and comparisons

6.142Overall, the fintech sector was supportive of the current scale and tempo of enhancements to regulation of the payments system. However, comparisons with international jurisdictions, such as the UK and Singapore, highlight areas for further improvement.

6.143Witnesses cited the approach of the UK Financial Conduct Authority (FCA) to payment system licensing as the best model. The FCA has two licences available for payment systems—either a payment institution licence or an electronic money institution licence.

6.144Wise described the UK e-money licensing regime as world’s best practice and ‘geared specifically towards new fintechs’.[90] Wise, which operates internationally, contrasted this regime with its experience in Australia, where Wise is considered ‘technically a bank’. This comes with significantly more burdensome licensing requirements.

6.145Expanding on this, the Australian fintech company Yondr Money pointed to such inflexible regulation in Australia as a barrier to entry that had quashed the ambitions of neobanks in this country in recent years—the launch rate of neobanks in Australia had been about a sixth of the launch rate in the UK since 2015.[91]

6.146While Australia has a strong regulatory framework around banking and payments regulation, it lacks a mandated focus on competition. Australia was compared to jurisdictions such as Singapore where there is a ‘genuine desire to encourage fintech growth and activity’.[92] The Monetary Authority of Singapore (MAS) is mandated to help grow the banking and payments sector, a capability and perspective that Australia’s regulators lack, according to some witnesses. The fintech Paypa Plane described it thus:

…for competition to be truly driving forward and providing consumers and businesses with experiences that are world class, we need to have that competition endemic and systemic throughout our ecosystem. We have a strong regulatory background for our banking and payments regulation in Australia; that is not only our strength in the veracity of our banking system but also our weakness in the way that those regulators are structured and the mandates about what is important to them. In Singapore, the MAS has two priorities. One is to regulate and protect the sustainability and safety of their financial ecosystem. But it is also tasked with growing that ecosystem, so competition is baked into how the regulators think. We don't have that baked-in capability in Australia, but we are in a position where we can look at pulling that into our payments regulation at the current time.[93]

6.147Comparisons to the UK and Singapore were also made regarding Australia’s capital requirements for prospective licence holders. In the UK, those wanting an e-money licence require initial capital of 350,000 euros and must satisfy ongoing minimum capital requirements of 2 per cent.[94] In Singapore, a fixed fee is used to determine the base capital requirements, depending on the type of licence. The Australian model requires a much higher 5 per cent of ongoing minimum capital and was viewed as an ‘enormous barrier to entry’, given that such funds could instead be used by companies to invest in technology to improve products or employ more staff.[95]

6.148The Committee did note, however, that the Government’s Strategic Plan for the Payments System aimed to better align Australia’s payments regulatory framework with international jurisdictions and intended to introduce legislation for a new licensing payments regime in 2024.[96]

De-banking

Context

6.149De-banking was raised as a serious challenge for the fintech sector, particularly for those in the payments system. De-banking refers to the practice by financial institutions of declining or limiting financial services to businesses across whole sectors if they are assessed as having a higher risk of their services being involved unknowingly in money laundering or financing terrorist activities.[97] Payment system fintechs are commonly affected by de-banking, which limits their ability—as emerging and innovative startups—to access the financial infrastructure needed to compete with established players.

6.150De-banking that specifically related to fintechs, digital currency providers and remittance providers was explored by a range of financial regulators and government departments in a policy options paper put to the Government in August 2022. The agencies’ view was that as Treasury and financial regulators continue to reform Australia’s payments and other financial regulatory regimes, banks ‘will become increasingly comfortable’ with providing core banking services to businesses in these sectors.[98]

6.151The Government, in its response to the options paper and its four recommendations, recognised the seriousness of de-banking, that inaction on the issue will stifle competition and innovation in the financial services sector and that de-banking may drive businesses underground. The Government also committed to taking action on de-banking and balancing support of affected businesses, while also acknowledging banks are commercial enterprises and must manage their own risk.[99]

6.152In its response, the Government agreed to Recommendation 1—that voluntary data collection be undertaken by the four major banks, with consideration to be given to a formal phase of data collection.[100]

6.153The Government supported in principle Recommendation 2—that all banks implement five related measures (including the need to document reasons for the de-banking; provide reasons to the customer and access to Internal Dispute Resolution procedures; and give a minimum of 30 days' notice) to improve transparency and fairness in relation to de-banking. The Government said such measures would address some of the main frustrations associated with de-banking.[101]

6.154The Government also supported in-principle Recommendation 3—that the four major banks be advised of the Government's expectations that they publish guidance applicable to the digital currency exchanges (DCE), FinTech and remittance sectors concerning their risk tolerance and their requirements to bank these sectors.[102]

6.155The Government noted Recommendation 4—that consideration be given by government to fund targeted education, outreach and guidance to the FinTech, DCE and remittance sectors.[103]

6.156In June 2023, AUSTRAC released new guidance on de-banking. It said de-banking had been increasing over the past decade and that it can have a devastating impact on legitimate businesses. Some sectors commonly affected by de-banking include remitters, digital currency exchanges and financial technology businesses. Additionally, de-banking can increase the risks of money laundering/terrorism financing. AUSTRAC continues to discourage the indiscriminate and widespread closure of accounts across entire industries.[104]

6.157AUSTRAC has also said that the closing of accounts leads to businesses being less open with their relationships and can have negative impacts on law enforcement. It might also lead to financial services companies having to regularly change financial institutions, which could cause issues with customer loyalty.[105]

Witness views

6.158The Committee heard from stakeholders on the impact of de-banking. FinTech Australia considered de-banking a significant barrier to competition that can have a ‘devastating impact on legitimate businesses’, and that the practice was anti-competitive and discriminatory.[106]

The practice of de-banking poses a significant threat to the entire fintech industry andundermines the goal of positioning Australia as a world-class centre for financial technology.Fintech companies must have access to banking services to thrive and ensure businesscontinuity. It can mean ADIs effectively become the gatekeepers to innovation, with the power todetermine which companies should and should not be granted access to banking services, and ultimately, the opportunity to succeed in Australia.[107]

6.159Cloud-based subscription payment platform EzyPay viewed market concentration in the payments ecosystem as the key issue needing to be tackled ‘rather than guidelines and further regulation on the banks in terms of how they decide to service—or not—fintech organisations’.[108]

6.160On the issue of market concentration, the ACCC referred the Committee to its 2019 inquiry into international money transfers and remittances, which found that new entrants were making ‘a material impact on competition’. However, that inquiry also found that the main issue limiting the scope for fintechs to challenge incumbents was their inability to access banking services.[109]

Major banks’ perspective

6.161The Committee raised with the major banks the issue of de-banking and asked for their perspective on how to ensure that de-banking did not suppress innovation.

6.162Westpac told the Committee that the anti-money laundering and counter-terrorism financing regime was the biggest driver of de-banking, given that the fines for non-compliance were very high. Accordingly, ‘we need to have a high standard and expectation’.[110]

6.163NAB, considered one of the leading funders of non-bank lenders and fintechs, noted that there were areas that extended beyond the bank’s risk tolerance and could therefore lead to de-banking.

There will be some sectors where…we just don't have the skills or the capability at both the banker level and the credit decision level to understand the risks that are in an industry, particularly an emerging industry. We continue to monitor all industries and look to build our capabilities. There will be some industries where the regulatory framework is very different on a state-by-state basis. It's hard for us to apply a consistent approach to an industry when you've got different state-based regulation and so on. Some industries, we think, have heightened risks associated with either financial crime or other issues, so we'll take an extremely cautious approach to any of those. In fact, where we think the customer is presenting additional risks to us, we might seek to exit that relationship. But that, again, is on a case-by-case basis, based on customer behaviour and our own risk assessment.[111]

Committee comment

6.164The Committee acknowledges the Government's commitment to ensuring the safety, affordability, trustworthiness, and accessibility of Australia's payments system. Recognising the potential for digital payments to increase competition, innovation, and productivity across the economy, the Committee emphasises the need for a regulatory framework of the sector that balances consumer safety with fostering innovation.

6.165To further advance these objectives, the Committee encourages the Government to collaborate with stakeholders from financial institutions, technology companies, and regulatory agencies. Despite Australia's positive standing in the financial technology space, the Committee believes there is room for improvement—particularly around licensing— and emphasises the need for ongoing collaboration to achieve these shared goals.

6.166That the Government explore the suitability of more flexible licensing arrangements for participants in the payments system, as part of the next review of the Government’s Strategic Plan for the Payments System (scheduled to commence by mid-2024).

Access to capital

6.167The Committee received evidence that capital markets could better drive economic dynamism in Australia, particularly through reforms that improve access to financing for smaller and newer businesses.

The capital challenge for SMEs

6.168The Productivity Commission cited research that about 19 per cent of small to medium enterprises (SMEs) say that a lack of finance restricts their capacity to innovate. A key issue is that while an SME may understand its risks well, a lender or equity provider may not. (Lenders are more accustomed to working with larger businesses and therefore have a better understanding of their risk profiles.) This is the primary reason lenders require collateral for lending and are incentivised to only seek finance for likely successful investments. Additionally, when an SME does obtain finance, borrowing costs are higher than for a larger business, reflecting the higher default risk.[112]

6.169Despite these disadvantages for SMEs, the Productivity Commission remained optimistic about the increasing opportunities for SMEs to access innovative finance options, given the expanding technology and data capabilities of lenders and government-promoted information-sharing initiatives.

The advancements made by lenders in technology and data capabilities, along with government initiatives promoting information sharing, have also created new avenues for SMEs to obtain loans. Although these developments are relatively recent, many lenders are improving their digital processes and considering new ways to leverage data on prospective borrowers to evaluate credit risks. The potential for scalability and the growing number of lenders participating in the market indicates that technological and data advancements will continue to enhance SME access to finance.[113]

Underdeveloped capital markets

6.170Several witnesses suggested Australia’s capital markets were too small and inflexible for the development needs of SMEs and start-ups.

6.171Westpac told the Committee that lack of scale, particularly compared to the US, and regulatory requirements would continue to inhibit equity capital markets in Australia, unless a new kind of equity exchange mechanism could be developed.

'Where can you get access to equity, the high-risk capital?' You've either got to go to private equity—you can't really use the ASX because the requirements to be a listed company are through the roof—or there might be an option for a different style of equity exchange where people can raise money.[114]

Capital collaborations with government: mixed views

6.172National Australia Bank agreed that Australia’s equity capital market was under-developed. It advocated for the expansion of initiatives such as the Business Growth Fund, a partnership between the Government and major banks ‘where equity capital has been made available to smaller businesses that are not able to demonstrate a track record of the size that might attract capital in more mature equity markets’.[115]

6.173Zepto, a fintech payments company, noted that Victoria had recently started a government-backed venture capital fund and that the concept could be explored at the federal level.[116]

6.174On the other hand, the Grattan Institute pointed to a government initiative to source capital that the Grattan Institute believed was not working—the business innovation investment visa program. The Grattan Institute stated that in its meetings with the ‘broader innovation community’ that nobody had indicated enthusiasm for this visa program. The Grattan Institute felt this was because the visa was not delivering significant venture capital as intended and said that groups such as the Tech Council of Australia were likely to share its view.[117]

Banking sector

6.175In the banking sector, a common regulatory issue raised by smaller and customer-owned banks was around capital requirements.

6.176BankWAW, which predominately operates in the business space, told the Committee that the large amount of capital it was required to hold had ‘limited our ability to get out there and do what we do well’. BankWAW welcomed recently introduced capital standards, however from a competitive standpoint, ‘there is still a disparity between us and our competitors’.[118]

6.177The customer-owned banks also viewed the capital funding requirements as not accurately reflecting the fact that their risk profile differed from major banks. Bank Australia commented that:

You can look at any of our balance sheets and see that our risk profiles are significantly different from those of larger for-profit institutions. When your customers own your business, as a responsible lender—and being close to the customer as well—the risk that we are writing is at a much lower level, even though we have to hold higher capital… The capital we have to hold for commercial lending is disproportionately high.[119]

6.178Bank Australia also noted that the capital requirements impacted its ability to provide social housing, noting that:

Our focus tends to be around social affordable housing and disability accommodation. The capital that we have to allocate constrains our ability to serve that segment of the market.[120]

6.179APRA said that the biggest challenge for start-up or customer-owned banks that required a licence was capital funding, followed by access to technology platforms. Nonetheless, APRA told the Committee, proportionality—which takes into account the size and experience of a potential new player—is an important consideration in its regulatory framework.

It requires a reasonable amount of investment in order to be granted a full banking licence on the day of becoming licensed. It's $15 million of capital that we require. It is not an overly substantial amount, but it is still found to be challenging. In order to be able to run a bank and build those technology platforms it is expensive. That's what we're finding the main challenge is with the entities that we have at the moment that are looking to be licensed.[121]

…

There are lots of examples that we have in the prudential standards where we apply a set of regulation to a major bank and, if you like, a slimmed down set of regulations or simpler set of regulations to try to get the same outcome with a smaller player. Often we're giving more time for smaller players to ease that burden as well. That's another key thing we do. Ms Roberts mentioned the licensing arrangements that apply. That is really an attempt by APRA to have a bifurcated system in terms of getting a licence. If entities would like to get a full licence, there's a full process that provides that, but there's actually a more streamlined process that enables newer players to come into the market and experiment in a safe zone, get confidence, get their capital, practise with their products to get a foothold in as a new player. There are a number of things we try to do within our remit to improve that.[122]

6.180NAB agreed that sustainable access to capital was a significant barrier to entry into, or remaining in, the banking industry. Noting the complex regulatory environment in the sector, NAB said that even fintechs in the UK, which had been operating for a decade and with significant numbers of customers, were still ‘struggling’ to be profitable.

With the capital stream to run a bank, you need probably a minimum of 10 years to get up and running.

…

It's a long path to profitability in banking. I don't think that's going to change. We operate in a complex regulatory environment.[123]

Social enterprise

6.181Access to capital is also an issue in the expanding social enterprise sector.

6.182The Social Enterprise Council of New South Wales and the ACT told the Committee that the sector required financing in a number of forms, including ‘grants, low- or no-interest loans, shared debt or equity’, as well as co-funding from government and philanthropy.[124]

6.183Social Enterprise Australia said that a grant may be most appropriate for an early stage enterprise trying to secure working capital, while an ‘outcome payment’ may be an option for a ‘more mature’ social enterprise.

We think it is worthwhile for the Government, where it is seeking a specific outcome, and often where it is already spending money on paying a service provider to deliver something, to test different ways of doing things through different forms of payments to deliver outcomes.[125]

The perspective of tech start-ups

6.184FinTech companies provided various perspectives on the challenges of access to capital for start-ups. A common theme was the need for regulatory certainty to provide confidence for investors.

6.185Airwallex said that a concern for start-ups was excessive capital requirements, which potentially came at the expense of the ability of a company to invest in future capability.

That's where we need to be really cognisant of the cost of every incremental percentage of capital requirement that's put on start-ups in the Australian economy, because it does make it more difficult to raise money.[126]

6.186Wise, a global payments company, observed that Australia’s licensing requirements—including for capital—were developed more than 20 years ago and are burdensome and complex for fintechs. Wise said that the UK’s prudential regime and licensing framework was world’s best practice, noting that the UK e-money licence is ‘geared specifically towards new fintechs like us’.[127]

6.187Block Payments cited the recommendation of a 2019 Senate inquiry into the Buy Now Pay Later sector that resulted in an industry code of practice.[128] This was preceded by a collaboration over two years where the regulator (ASIC) collected information from industry, leading to better mutual understanding and ‘a little bit of regulatory certainty’. Expanding further, Block told the Committee that:

I would definitely support the Committee endorsing that type of approach and giving, I guess, regulators the mandate to be more creative when it comes to understanding emerging industries—not necessarily having them focused on just their own patch and actually thinking more broadly about how their regulatory perimeter might be expanding as a result of the creation of new products and product adjacencies as well.[129]

6.188Birchal, an equity crowd-funding platform, discussed its crowd-sourced funding (CSF) model, which enables equity funding of SMEs. It said that CSF ‘enables eligible proprietary limited and unlisted public companies to make a regulated public offer of securities to retail and wholesale investors, all online’. Under the current regulatory regime, companies that raise capital through CSF are required to prepare a regulated disclosure document in accordance with the Corporations Act 2001. The model, Birchal continued, brings ‘transparency and accountability to a previously opaque part of the financial system’.[130]

6.189In Birchal’s view, the CSF regime could be enhanced by offering better tax incentives for companies and investors, expansion of the CSF regime from ordinary shares to other types of securities, and improved liquidity by freeing up the ability of investors to sell or trade shares acquired under a CSF offer.[131]

Footnotes

[1]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, p. 32.

[2]Financial Conduct Authority, Regulatory Initiatives Grid, www.fca.org.uk/publications/corporate-documents/regulatory-initiatives-grid, viewed 31 October 2023.

[3]Mr Chris Taylor, Chief of Policy, Australian Banking Association, Committee Hansard, 31 August 2023, p. 11.

[4]Ms Anna Bligh, Chief Executive Officer, Australian Banking Association, Committee Hansard, 31 August 2023, pages 10-11.

[5]Customer Owned Banking Association (COBA), Submission 33, p. 1.

[6]COBA, Submission 33, p. 1.

[7]Mr Michael Mack, Chief Executive Officer, BankWAW, Committee Hansard, 4 July 2023, p. 4.

[8]Mr Damien Walsh, Managing Director, Bank Australia, Committee Hansard, 4 July 2023, p. 3.

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[11]Insurance Council of Australia, Submission to the Productivity inquiry (2023), 1 December 2022, p. 4, www.pc.gov.au/__data/assets/pdf_file/0003/352137/sub203-productivity.pdf.

[12]Mr Ross McEwan, Chief Executive Officer and Managing Director, National Australia Bank (NAB), Committee Hansard, 12 July 2023, p. 47.

[13]Ms Anna Bligh, Chief Executive Officer, Australian Banking Association, Committee Hansard, 31 August 2023, p. 11.

[14]Ms Anna Bligh, Chief Executive Officer, Australian Banking Association, Committee Hansard, 31 August 2023, p. 11.

[15]ACCC, Council of Financial Regulators, www.accc.gov.au/inquiries-and-consultations/consultative-Committees/council-of-financial-regulators, viewed 31 October 2023.

[16]Ms Marnie Baker, Chief Executive Officer and Managing Director, Bendigo and Adelaide Bank, Committee Hansard, 4 July 2023, p. 27.

[17]APRA, Answer to Question on Notice, APRA-ED01QON, p. 2.

[18]APRA, Answer to Question on Notice, APRA-ED01QON, p. 2.

[19]M Hack and S Nicholls, Reserve Bank of Australia, ‘Low Interest Rates and Bank Profitability – the International Experience So Far’, 17 June 2021, p. 83, www.rba.gov.au/publications/bulletin/2021/jun/low-interest-rates-and-bank-profitability-the-international-experience-so-far.html.

[20]APRA, Answer to Question on Notice, APRA-ED01QON, p. 2.

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[23]APRA, Answer to Question on Notice, APRA-ED01QON, p. 3.

[24]APRA, Answer to Question on Notice, APRA-ED01QON, p. 3.

[25]APRA, Answer to Question on Notice, APRA-ED01QON, p. 3.

[26]Dr Sean Carmody, Executive Director, Insurance Division, Australian Prudential Regulation Authority, Hansard Transcript, 2 June 2023, p. 20.

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[28]Mr Paul Lewis, Chief Executive Officer and Managing Director, Great Southern Bank, Committee Hansard, 30 June 2023, p. 18.

[29]Mr Peter Lock, Chief Executive Officer, Heritage and People’s Choice Ltd, Committee Hansard, 30 June 2023 p. 5.

[30]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, p. 1.

[31]G Tanzer, Commissioner, ASIC, ‘Global developments in securitisation regulation – an ASIC perspective’, Speech, Australian Securitisation Forum Conference 2012, Hilton Sydney, 22 October 2012.

[32]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, p. 3.

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[34]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, pages 3-4.

[35]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, p. 3.

[36]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, p. 2.

[37]Ms Anna Bligh, Chief Executive Officer, Australian Banking Association, Committee Hansard, 31 August 2023, p. 13.

[38]Professor Allan Fels AO, ‘Inquiry into price gouging and unfair pricing practices final report’, February 2024, p. 42, www.actu.org.au/wp-content/uploads/2024/02/InquiryIntoPriceGouging_Report_web9-1.pdf.

[39]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, p. 1.

[40]ACCC, ‘Retail deposits inquiry final report’, 15 December 2023, pages 117, www.accc.gov.au/about-us/publications/retail-deposits-inquiry-final-report.

[41]Financial Conduct Authority, ‘Our response to the CMA’s final report on its investigation into competition in the retail banking market’, November 2016, p. 6, www.fca.org.uk/publications/corporate-documents/our-response-cma-investigation-competition-retail-banking-market.

[42]Ms Leah Won, General Manager, Competition Enforcement and Financial Services, ACCC, Committee Hansard, 17 March 2023, p. 7.

[43]ACCC, ‘Home loan price inquiry – final report’, 5 December 2020, p. viii, www.accc.gov.au/about-us/publications/home-loan-price-inquiry-final-report.

[44]ACCC, ‘Home loan price inquiry – final report’, 5 December 2020, p. viii.

[45]ACCC, ‘Home loan price inquiry – final report’, 5 December 2020, pages viii-x.

[46]Ms Leah Won, General Manager, Competition Enforcement and Financial Services, ACCC, Committee Hansard, 17 March 2023, p. 8.

[47]Ms Anna Bligh, Chief Executive Officer, Australian Banking Association, Committee Hansard, 31 August 2023, p. 9.

[48]Mr Ross McEwan, Group Chief Executive Officer, AB, Committee Hansard, 12 July 2023, pages 57-58.

[49]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 12 July 2023, p. 27.

[50]ACCC, ‘Retail deposits inquiry final report’, 15 December 2023, p. 8.

[51]ACCC, ‘Retail deposits inquiry final report’, 15 December 2023, pages 10-11.

[52]ASIC, ‘Tabled Document No.2: Briefing on Competition and Tracker Mortgages’, Senate Supplementary Budget Estimates 2016-17, 19 October 2016, p. 2.

[53]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, p. 5.

[54]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, p. 6.

[55]Mr Ian Narev, Chief Executive Officer, CBA, and Mr David Cohen, Chief Risk Officer, CBA, Committee Hansard, 4 October 2016, House Standing Committee on Economics, Review of the Four Major Banks, pages 5-6, pages 27-28; Mr Andrew Thorburn, Chief Executive Officer, NAB, and Mr Antony Cahill, Chief Operating Officer, NAB, CommitteeHansard, 6 October 2016, House Standing Committee on Economics, Review of the Four Major Banks, p. 6; Mr Brian Hartzer, Chief Executive Officer and Managing Director, Westpac Group, Committee Hansard, 6 October 2016, House Standing Committee on Economics, Review of the Four Major Banks, p. 43.

[56]Mr Shayne Elliott, Chief Executive Officer, ANZ, Committee Hansard, 5 October 2016, House Standing Committee on Economics, Review of the Four Major Banks, pages 5–6.

[57]Mr Greg Medcraft, Chair, Australian Finance Group, Committee Hansard, 23 August 2023, p. 5.

[58]Ms Gina Cass-Gottlieb, Chair, ACCC, Committee Hansard, 17 March 2023, p. 6.

[59]Ms Leah Won, General Manager, Competition Enforcement and Financial Services, ACCC, Committee Hansard, 17 March 2023, p. 6.

[60]ACCC, ‘Money remitters improve price transparency after ACCC inquiry’, Media release, 18 August 2021.

[61]Mr David Cohen, Deputy Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, p. 27.

[62]Mr Ross McEwan, Group Chief Executive Officer, NAB, Committee Hansard, 12 July 2023, p. 62.

[63]UK Government, The Behavioural Insights Team, ‘The impact of improved transparency of foreign money transfers for consumers and SMEs’, 2018, p. 7, www.bi.team/publications/the-impact-of-improved-transparency-of-foreign-money-transfers-for-consumers-and-smes/.

[64]Mr Jack Pinczewski. APAC Government Relations Lead, Wise. Committee Hansard, 03 May 2023, p. 27.

[65]Wise, ‘White paper: Implementing transparency & fairness in cross-border payments for Australian consumers’, p. 1, https://wise.com/imaginary-v2/images/ad43ac35cada363f50ee3e072abfb9b6-Australian%20White%20paper_%20Implementing%20transparency%20&%20fairness%20in%20cross-border%20payments%20(2).pdf, viewed 27 February 2024.

[66]Mr Shayne Elliott, Chief Executive Officer, ANZ. Committee Hansard, 12 July 2023, p. 30.

[67]Mr Peter King, Chief Executive Officer, Westpac Group, Committee Hansard, 13 July 2023, p. 53.

[68]Mr David Cohen Deputy Chief Executive Officer, CBA, Committee Hansard, 13 July 2023, p. 28.

[69]Mr. Jack Pinczewski, APAC Government Relations Lead, Wise, Committee Hansard, 03 May 2023, p. 27.

[70]FinTech Australia, Submission 28, p. 8.

[71]Treasury, ‘Review of the Australian Payments System – Final report’, 30 August 2021, p. vii, treasury.gov.au/publication/p2021-198587.

[72]Reserve Bank of Australia, ‘Consumer Payment Behaviour in Australia’, 15 June 2023, p. 21, www.rba.gov.au/publications/bulletin/2023/jun/consumer-payment-behaviour-in-australia.html.

[73]Treasury, ‘Review of the Australian Payments System – Final report’, 30 August 2021, p. vii.

[74]Treasury, Terms of Reference for the Review of the Australian Payments System, treasury.gov.au/review/payments-system-review/terms-of-reference.

[75]Treasury, ‘A Strategic Plan for Australia’s Payments System’, 7 June 2023, p. 15, treasury.gov.au/publication/p2023-404960.

[76]APRA, Licensing guidelines for authorised deposit-taking institutions, www.apra.gov.au/licensing-guidelines-for-authorised-deposit-taking-institutions, viewed 28 November 2023.

[77]Australian Banking Association, Submission 22, p. 1.

[78]Treasury, ‘Review of the Australian Payments System – Final report’, 30 August 2021, p. xiii.

[79]Mr James Foster, Chief Executive Officer, Ezypay, Committee Hansard, 3 May 2023, p. 34.

[80]FinTech Australia, Submission 28, p. 8.

[81]Tech Council of Australia, Submission 32, p. 14.

[82]Mr Jack Pinczewski, APAC Government Relations Lead, Wise, Committee Hansard, 3 May 2023, p. 34.

[83]Ms Amelia Hamer, Director of Strategy for Australia and New Zealand, Airwallex, Committee Hansard, 3 May 2023, pages 2-3.

[84]Treasury, ‘Review of the Australian Payments System – Final report’, 30 August 2021, p. 18.

[85]Mr James Foster, Chief Executive Officer, Ezypay, Committee Hansard, 3 May 2023, p. 34.

[86]Mr Ross McEwan, Chief Executive Officer, NAB, Committee Hansard, 12 July 2023, p. 56.

[87]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, pages 55-56.

[88]Mr John Lonsdale, Chair, APRA, Committee Hansard, 2 June 2023, p. 14.

[89]Mr John Lonsdale, Chair, APRA, Committee Hansard, 2 June 2023, p. 16.

[90]Mr Jack Pinczewski, APAC Government Relations Lead, Wise, Committee Hansard, 3 May 2023, p. 34.

[91]Mr Shane Chanel, Chief Executive Officer and Co-founder, Yondr Money, Committee Hansard, 3 May 2023, p. 29.

[92]Mr Jack Pinczewski, APAC Government Relations Lead, Wise, Committee Hansard, 3 May 2023, p. 34.

[93]Ms Simone Joyce, Chief Executive Officer, Paypa Plane, 3 May 2023, p. 25.

[94]Capital requirements are regulatory standards for financial institutions that determine how much liquid capital (easily sold assets) they must keep on hand, concerning their overall holdings, to reduce their risk of default.

[95]Ms Amelia Hamer, Director of Strategy for Australia and New Zealand, Airwallex, Committee Hansard, 3 May 2023, p. 7.

[96]Treasury, ‘A Strategic Plan for Australia’s Payments System’, 7 June 2023, p. 15.

[97]AUSTRAC, New guidance released on de-banking, 27 June 2023, www.austrac.gov.au/new-guidance-released-debanking.

[98]Council of Financial Regulators, AUSTRAC, ACCC and the Attorney-General’s Department, ‘Potential Policy Responses to De-banking in Australia’, August 2022, p. 1, www.cfr.gov.au/publications/policy-statements-and-other-reports/2022/potential-policy-responses-to-de-banking-in-australia/pdf/potential-policy-responses-to-de-banking-in-australia.pdf.

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[101]Australian Government, ‘Government response to Potential Policy Responses to De-banking in Australia’, 28June 2023.

[102]Australian Government, ‘Government response to Potential Policy Responses to De-banking in Australia’, 28June 2023.

[103]Australian Government, ‘Government response to Potential Policy Responses to De-banking in Australia’, 28 June 2023.

[104]AUSTRAC, New guidance released on de-banking, 27 June 2023.

[105]AUSTRAC, ‘AUSTRAC statement 2021: de-banking’, Media Release, 29 October 2021.

[106]FinTech Australia, Submission 28, p. 3.

[107]FinTech Australia, Submission 28, p. 4.

[108]Mr James Foster, Chief Executive Officer, EzyPay, Committee Hansard, 3 May 2023, p. 26.

[109]Ms Leah Won, General Manager, Competition Enforcement and Financial Services, ACCC, Committee Hansard, 17 March 2023, p. 7.

[110]Mr Peter King, Chief Executive Officer, Westpac, Committee Hansard, 13 July 2023, p. 46.

[111]Mr Shaun Dooley, Group Chief Risk Officer, NAB, Committee Hansard, 12 July 2023, p. 48.

[112]Productivity Commission, Submission 1.1, pages 5-6.

[113]Productivity Commission, Submission 1.1, p. 6.

[114]Mr Peter King, Chief Executive Officer, Westpac Group, Committee Hansard, 13 July 2023, p. 54.

[115]Mr Shaun Dooley, Group Chief Risk Officer, NAB, Committee Hansard, 12 July 2023, p. 60.

[116]Mr Gabe Perottet, Senior Legal Counsel, Public Policy and Regulation, Zepto Payments, Committee Hansard, 3 May 2023, pages 12-13.

[117]Mr Brendan Coates, Economic Policy Program Director, Grattan Institute, Committee Hansard, 2 May 2023, p. 13.

[118]Mr Michael Mack, Chief Executive Officer, BankWAW, Committee Hansard, 4 July 2023, p. 9.

[119]Mr Damien Walsh, Managing Director, Bank Australia, CommitteeHansard, 4 July 2023, p. 9.

[120]Mr Damien Walsh, Managing Director, Bank Australia, Committee Hansard, 4 July 2023, p. 9.

[121]Ms Renee Roberts, Executive Director, Banking Division, APRA, Committee Hansard, 2 June 2023, p. 6.

[122]Mr John Lonsdale, Chair, APRA, Committee Hansard, 2 June 2023, p. 6.

[123]Mr Ross McEwan, Group Chief Executive Officer, NAB, Committee Hansard, 12 July 2023, p. 57.

[124]Ms Kylie Flament, Chief Executive Officer, Social Enterprise Council of NSW & ACT, Committee Hansard, 5 July 2023, p. 4.

[125]Ms Jess Moore, Chief Executive Officer, Social Enterprise Australia, Committee Hansard, 5 July 2023, p. 24.

[126]Ms Amelia Hamer, Director of Strategy, Australia and New Zealand, Airwallex, Committee Hansard, 3 May 2023, p. 13.

[127]Mr Jack Pinczewski, APAC Government Relations Lead, Wise, Committee Hansard, 3 May 2023, p. 34.

[128]Senate Standing Committee on Economics, Credit and financial services targeted at Australians at risk of financial hardship, 22 February 2019, www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/Creditfinancialservices/Report.

[129]Mr Michael Saadat, International Head of Policy, Block, Committee Hansard, 3 May 2023, p. 14.

[130]Mr Matthew Vitale, Chief Executive Officer and Co-founder, Birchal, Committee Hansard, 3 May 2023, p. 28.

[131]Mr Matthew Vitale, Chief Executive Officer and Co-founder, Birchal, Committee Hansard, 3 May 2023, p. 28.