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Speaking to analysts during an environmental, social and governance (ESG) briefing on Thursday, ANZ chief executive Shayne Elliott stated observers should be “cautious” around certain newer banks and non-bank lenders.
“When I look at a lot of the disruption around banking, as far as I can tell, very little of it has a business model of improving financial wellbeing for customers, a lot of it is actually the opposite,” Mr Elliott said.
“And we see, for example, in the small business lending space, non-bank financial lending at 20, 30, 40 per cent per annum kind of rates. So that is where there is a lot of disruption, if you will, I understand it might be easier to access some of that but... I don’t think it necessarily meets the requirements around or the definition of responsible or improving financial wellbeing.”
He added that while there are criticisms of the incumbent major banks, they are “pretty transparent and people know what they’re getting”.
“I think what worries me is that a lot of the so-called innovation we’re seeing in the marketplace from companies is largely products that are not transparent,” Mr Elliott said.
“They seem so, so these ideas of interest-free, or somehow, products that are packaged in a certain way that attract customers, but actually have business models that profit from, default rates or other things.
“So I’m not sure and I worry personally that in a time of stress and that’s where we’re in, where people are stressed and thinking about the future that people are susceptible to some of these, sort of so-called innovations. I think we’ve got a job to do to make sure our products are suitable.”
An analysis from S&P last year forecast a wave of fintech disruption in banking, with consumer demand for tech-driven convenience expected to rise.
But, the credit agency stated the major banks should be able to absorb threats posed by disruptors by leveraging their market dominance.
“Collectively, the four major banks control about 75 per cent of the Australian banking sector, giving them significant influence over the rollout of fintech innovations to the Australian population,” the analysis stated.
The big four’s higher exposure to mortgages was also expected to offset any potential losses incurred in channels more susceptible to technological disruption.
Further, Mr Elliott reflected on the state of the lending market, expressing concerns around operating pressures for small businesses and higher levels of household debt, particularly for first home buyers.
The CEO gave a nod to house prices escalating at a pace greater than wage growth, stating lenders should consider tightening their standards and they shouldn’t wait for regulatory intervention.
Balancing responsible lending against discrimination
Mr Elliott also reflected on the disproportional effect of the COVID-19 pandemic on women’s unemployment and underemployment rates, particularly for those in sectors most hard-hit.
While ANZ does not have a specific policy pertaining to female borrowers, the bank should make sure it is not inadvertently penalising women for circumstances beyond their control, Mr Elliot said.
“We do see that in our customer base and they’re… being impacted more. Now it puts us in a difficult position, as you would imagine,” Mr Elliott said.
“On one hand, we have to make sure that we’re not discriminating and we’re fair and reasonable and we make sure that there is… ethical and fair access to credit.
“But on the other hand, we are a bank. And we have a responsibility to make sure that we lend prudently and abide by not just the law around responsible lending, but doing the right thing and making sure people are not getting in over their head.”
[Related: Big four likely to dampen competition: ACCC]