The Reserve Bank last month asked industry to weigh in on the future of financial payments in a discussion paper that canvassed the death of cash and cheques and the rise of an Australian electronic currency. These changes are years or decades away, but People’s Choice Spokesperson Stuart Symons says there are trends occurring this coming year that banking customers should consider.
“Industry has moved far beyond passbooks, and even passwords are becoming old hat with the rise of biometric scanners and electronic wallets,” he said. “Every change is also an opportunity, so we have identified six trends that may save you money or distress in 2020.
1. Credit scores become consumer weapons
Comprehensive Credit Reporting will allow lenders and other providers to look beyond defaults to more positive credit behaviour, Mr Symons said.
“A window into a person’s broader credit history, not just their negative behaviour, will help financial institutions be better informed which should reward people with a positive credit history,” he said.
“It will mean that missing a mortgage or credit card payment once would be weighed up against the fact that you have never missed another payment or that you usually pay ahead rather than being an automatic strike against you. For people who feel their credit history is not going to tell a positive story, the new system gives them the opportunity to make some changes and improve their credit score.”
Knowing you have a healthy credit score also means you can start to talk with lenders about the best deals they can offer, Mr Symons said.
2. Cheapest rates in more than a century
Reserve Bank Governor Philip Lowe has repeatedly stressed that the current environment of low interest rates is the best in more than a century – and it is here to stay for some time. Mr Symons said borrowers should consider taking advantage of those rates.
“Low rates don’t just mean lower repayments – they mean you can pay off your home loan sooner and save big money in the long run,” Mr Symons said.
“If you took out your loan more than a year ago, there is a strong possibility you can do better if you look beyond the comparison rates – not just headline rates – offered by the Big Four banks to alternatives like credit unions. If it has been some time since you’ve looked at refinancing, you may also find that rising house prices may free up some cash or you might find another product that better suits you and your current needs.
“The important thing is to look around and ask the question.”
3. Rise and rise of ATM alternatives
Tap and go, EFTPOS, Apple Pay and wearables – our need for cash is rapidly falling, Mr Symons said.
“People are increasingly taking out smaller amounts of cash at supermarkets, visiting Australia Post for [email protected], and relying on digital transactions for the rest,” he said. “They all fit more easily into our busy lifestyles.”
“The practical repercussion is that there is less demand for ATMs, and that shows in the numbers: there are only about 11,560 ATMs across the country, 2,255 fewer than two years ago.
“We don’t expect this trend to change, so it may be that the best advice for modern times is to make sure you know your alternatives so you have a small bit of cash on you at all times.”
4. Welcome to the simplicity trap
“The rise of neobanks is driving a trend to open accounts online with multiple institutions, even as a means of exploring offerings. It’s a trend that is promoting a wave of simplicity across the sector,” Mr Symons said.
“But there is a catch: multiple accounts for different purposes can quickly grow into a minefield of lost opportunities to consolidate and control your finances. The trick for consumers will be to limit that growth so they remain in control across multiple platforms.
“It is also important to ask whether that account will meet your needs. Your circumstances may require more support or you may have loans or other deposits that you need to integrate easily with your other accounts. You really don’t want to create more work for yourself and, given this is a rapidly growing sector, it will also be interesting to see how long a number of these institutions last.”
5. If it sounds too good to be true…
Scams are now a part of our lives. That is not going to change – except they will sound better, Mr Symons said.
“Scammers are becoming more sophisticated and integrating more closely with all aspects of our lives, whether that is through a fake text message from your institution or a special shopping offer or a phone call from the tax office asking for fines to be paid in gift vouchers,” he said.
“This is only going to increase, and if you hand over passwords and other identifiers, there may be little that your financial institution can do to protect you and your funds.
“Everyone has to be on their guard and improve their understanding of digital protection. Everyone.”
6. Experience at the heart of a new ecosystem
“People are likely to see an increased integration of traditional service providers with partner services. Technology providers may look to financial services to bolster their offerings and build a strong consumer experience,” Mr Symons said.
“This is already happening but there is still a long way to go before it becomes more mainstream – including some work on the regulatory front. But the one thing that will drive it will be experience: if it makes life better for users, you can expect this trend to accelerate.”
How did our 2019 financial predictions play out?
A year ago People’s Choice predicted five key trends for 2019 – and we may have been too early for some.
Financial information working for you
Open Banking and Comprehensive Credit Reporting were just buzz words in 2019, with legislative delays and pauses meaning there wasn’t much to see. We’re banking on the fact we called this too early and are going ffor it in 2020. But it means a miss in 2019.
Closer scrutiny of expenses when borrowing
A definite hit. While it involves more work for consumers, it also means better outcomes. We expect this trend to continue.
Real time payments gain more grunt
We expected to see the NPP expand into more areas as the benefits of near real-time transactions became clearer. Sadly, we are still waiting. Then again, so is the Reserve Bank, which has expressed its frustration over the slow pace of adoption.
Digital voice banking
Not yet. Voice-activated assistants are readily penetrating households. The integration of banking won’t be far off.
Simplified product offerings
Regulators have pushed for streamlined and simplified products, and industry is meeting this demand. We expect the introduction of “basic” products in the coming year.