Aussies in regional areas are fed up with bank branch closures, but a new alliance will lobby on their behalf to make this a thing of the past. Aaron Newman (right) said communities could be wiped out if this trend continues. (Source: 9News/Supplied)
Two dozen banks and supporters have come together to find a solution to a crisis that’s decimating communities across the country. The cashless revolution has seen many regional bank branches closed down forever, and it’s feared some towns could be wiped out forever if this trend continues.
The newly formed Regional Banking Investment Alliance (RBIA) is hoping to use its size and influence to ensure no more areas lose their access to branches or cash. Alliance spokesperson Aaron Newman told Yahoo Finance there is a massive human cost to the cashless overhaul.
“When a bank withdraws, and if they’re the last bank in town, for many of the smaller communities, it’s the continued impact of their ongoing viability into the future, which I think is one of the biggest concerns for people living there,” he said.
The RBIA will try to lobby the government to find ways to keep branches open in the years to come.
Labor brokered a deal with Commonwealth Bank (CBA), ANZ, NAB, and Westpac to ensure no more regional branches would close until at least 2027.
Newman said the arrangement was a great step, but feared for what would happen to some communities once that deadline is up.
He would like to see a regional services bank levy established, as it would incentivise banks, particularly larger ones, to stay put or pay their fair share to support non-metro areas.
Do you have a story? Email stew.perrie@yahooinc.com
“Conceptually, it would mean that banks that operate in regional or remote areas would receive the financial benefit of the levy, and the banks that don’t operate any regional presence will pay the levy,” Newman said.
“It’s a method of redistribution to compensate the subsidisation of providing those physical branches in regional and remote communities.
“There is no cost to government in this way, and there’s also no cost to the consumer.”
Treasury has been looking into the idea but it’s unclear whether the government will jump on the concept.
It certainly wouldn’t be cheap for some banks.
According to the Australian Financial Review, Westpac would pay more than $100 million a year under the plan, CBA would pay about $75 million, Macquarie Bank $75 million, ING $60 million, ANZ $20 million and HSBC $20 million.
That’s a cool $350 million per year.
Bendigo and Adelaide Bank could receive upwards of $200 million under the plan, however it recently announced a slew of branch closures.
CBA, ANZ, and Westpac could soon have to pay tens of millions of dollars to regional banks to keep branches open. (Source: AAP) · AAPIMAGE
NAB would get $75 million due to its farming banking business presence, and Rabobank would also be in credit.
But the Parliamentary Budget Office warned this could backfire for everyday Aussies.
It warned banks could pass on 75 per cent of the increased cost to customers through “increases to fees on banking products, increases to interest rates on mortgage products, or decreases in interest payments on savings”.
Newman believes the banking sector is far to competitive to see everyday customers saddled with extra costs if the levy was brought in.
Treasurer Jim Chalmers signalled last year he is keen for a solution, but admitted it required a lot of discussion.
“I think every Australian in the bush understands that there has been a withdrawal of services,” he said.
“As the government which governs for the whole country, we’re very focused on that, and so we engage in these consultations and conversations from time to time.
Regional residents can be forced to drive tens or even hundreds of kilometres to find the next available branch if theirs shuts down.
Tom Price, a town in Western Australia’s Pilbara region, lost its last remaining bank branch in 2022, and people were faced with a 700-kilometre round-trip to get to their nearest bank in Karratha.
Many people in these communities, including residents and small business owners, still rely heavily on cash for their everyday purchases, shopping, and transactions.
Jan Harman, who lives in Kapunda, a rural town near the Barossa Valley in South Australia, is one of those people. She has watched over three decades as the number of branches dwindled to nothing, and her nearest branch is now 30 minutes away.
Senior and regional Australians like Jan Harman are worried about the shift to a cashless society. (Source: Supplied/Getty) · Source: Supplied/Getty
“I don’t know how people are going to be able to survive without having a small amount of cash to spend so they can continue to participate in the life of the community,” Harman told Yahoo Finance.
“It’s essential to the sense of community and the ability of community groups to fund themselves.”
Yahoo Finance has spoken to many people like Jan who have been affected by regional bank branch closures. They have all said the trend has changed the way their town works for the worse.
The RBIA said the big banks have closed more than 90 regional branches since February 2022.
Some areas don’t have good access to digital payment technology compared to metropolitan areas due to signal and other issues, which is why cash has continued to reign supreme.
Newman said city folk vastly underestimate the technological services available and operational in regional areas.
He added that closing down a branch can quickly start a domino effect that could wipe out whole towns in the future.
“The local butcher or bakery often needs the ability to bank their cash,” he told Yahoo Finance.
“If there’s no bank in town, it makes it much more difficult for those businesses to operate. This erodes the willingness of small business owners to continue to operate if they don’t have access to the banking services they need to run their business.”
If there aren’t any businesses, residents struggle to survive on their own.
Newman said Australia needs to have a cash-in-transit system that is reliable and not on the brink of collapse.
At the moment, Armaguard, which is the country’s biggest cash transport company, is responsible for moving around 90 per cent of physical money around.
It was saved from shutting down last year thanks to a $50 million deal organised by the Big Four banks, supermarkets, Australia Post and other stakeholders.
That deal was recently renewed, but Newman said a long-term solution needs to be brokered.
While he didn’t know what the best avenue that would be, he insisted it’s an essential piece of the puzzle that required attention if regional communities want to use cash in the future.
Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.