Expert predictions for banking 2020: RBA cuts to neobank home loans
Wednesday 08 January 2020
According to Mozo experts, many Australians are changing the way they interact with money - moving away from ATMs and the physical wallet, towards smartphones and open banking to manage their finances.
So to kick off 2020, we’ve peeked into the crystal ball and predicted some of the top financial trends of the new year worth keeping an eye on:
Bye bye branches and ATMs
With big bank profits plummeting in the wake of the Royal Banking Commission last year, banks have been finding new ways to cut back on costs. From physical branches closing down, to more and more ATMs disappearing off the streets, it seems that many banks have pulled back on their efforts to meet the needs of customers who use cash, particularly as a shrinking number of Australians rely on this payment method.
According to APRA’s ‘Points of Presence’ report, the number of bank branches in major Australian cities has dropped by about 9% in just two years. In 2019 alone, the Commonwealth Bank shut down nearly 100 branches, while Westpac removed 375 ATMs from convenient locations. These trends are expected to continue across the board this year, with options for cash withdrawal and face-to-face customer service set to become even more limited.
Cashless and cardless the new way to pay
But it’s not only cash that we are bidding farewell to - fewer Australians will carry a piece of plastic in their wallets as the paltry return on credit card rewards and low consumer confidence leaves many focused more on ditching debt than on spending. The wide acceptance of debit cards and an explosion of new digital payment platforms like Buy Now Pay Later will also cause credit cards to lose some of their sheen.
Meanwhile, with the growing popularity of tap-and-go and cardless payment options (including Apple Pay, Samsung Pay and Google Pay), smartphones could be a major contender for the most popular way to pay in 2020.
Crackdown on Buy Now Pay Later
Speaking of Buy Now Pay Later, as many as 30% of Australian adults now have one or two BNPL accounts - that’s roughly 5.8 million users nationally. But the payment platform still isn’t subject to any regulations, like the National Credit Act and Code, that require BNPL providers to meet responsible lending obligations.
This may change in 2020, with our experts predicting that ASIC may step in and tighten the rules around Buy Now Pay Later - whether that’s regulating fees or ordering providers to perform more extensive credit checks before approving users. This could mean a tougher application process and stricter spending limits for consumers.
Besides Buy Now Pay Later, neobanks also left a big imprint on the financial world last year - and they’ll continue to do so in 2020, ruffling the feathers of the big four banks. In fact, recent Mozo research revealed 1 in 4 Australians, or around 4.9 million customers, have switched or seriously considered switching from one of the big four to a neobank.
In 2019, 86 400 became the first neobank to offer home loans to Australian customers, boasting application approval speeds that are six times faster than securing a mortgage with the big four. More and more neobanks may follow in 86 400’s footsteps and launch a whole suite of products for consumers, from savings accounts to home loans.
A one-stop shop for all your finances
Thanks to the introduction of open banking in Australia, consumers could soon have more complete access to their data and the right to share that data with other banks, institutions and fintechs. For instance, an ANZ customer who has a savings account with HSBC and a home loan with NAB could elect to have all of their information in one place - say, on their ANZ banking app - providing them with a clearer big-picture view of all their banking activities.
Open banking promises to put control into the hands of customers. More specifically, it would reduce the pain and hassle of switching to a better deal, which would in turn boost competition in the banking sector.
RBA to keep cutting, cutting, cutting
Taking a more sweeping look at the economy, the Reserve Bank will continue to be busy in 2020, with two potential cash rate cuts in the pipeline - one in February and the other mid-year.
These predicted cuts will be part of the RBA’s efforts to keep the economy afloat as higher costs of living, slowing wage growth and rising unemployment figures continue to put a strain on consumer confidence and spending.
Fairer home loan rates for all
With three 0.25% RBA cuts last year causing lenders to drop their home loan interest rates left, right and centre, it’s become even more apparent that existing mortgage customers aren’t always offered the same great rates as new borrowers - so they end up paying a lot more for their home loan. In 2020, an inquiry from the ACCC could help to get rid of this inequality.
And if you want to weigh up your home loan offer against the rates snatched up by other customers in the same area with similar loan amounts, 2020 could also be the year when you’ll have access to rate benchmarking through a government comparison site.
Interested in switching to a better deal today? Check out these refinance home loans below, or head over to our home loans comparison table to compare even more options