Your payment’s in the mail
One government owned business has taken an entrepreneurial approach to a changing business environment, setting itself up as a ‘services supermarket’, one that is heavily skewed towards the distribution of banking, insurance and other financial sector products.
Bernard Kellerman reports on the re-invention of Australia Post.
In assessing where the next round of banking competition is likely to come from, many observers ignore what one former banker has termed the sleeping giant – Australia Post.
While the organisation, headed as it is by a high profile ex-banker, in the form of Ahmed Fahour former chief executive of NAB’s Australian operations – has often been touted as a future “people’s bank”, Australia Post itself has always been quick to hose down such speculation that it wanted to go head to head with the banks.
The organisation’s chairman, David Mortimer, pointedly observed in a recent interview: “We will never be a banker. We don’t have the resources and we don’t have the trained people to do banking business. We will simply be an agent.”
Paul Dowling, principal analyst at banking research and advisory firm, East and Partners, said Australia Post is heading further into financial service, but not into banking:
“Since [Ahmed] Fahour’s appointment, there has been a lot of chatter about Aussie Post entering the banking space,’ he said.
“Our view is that you’ll see Aussie Post playing in the payments space and a combination of over-the-counter and internet-based financial services and product distribution on behalf of [several] banks – not a brokerage model, a distribution model.”
“This goes back to David Morgan’s comments when he was running Westpac that banks need to decide whether they are a manufacturer or a distributor,” Dowling said.
Andrew Maitland, Australia Post’s general manager of financial and commercial services, was on the same wavelength. “We’re clear on that: we’re not about to become a bank. There are a lot of opportunities [for us] without having to be a bank having to address those balance sheet risk issues.”
“Rather than seeing ourselves competing, we see ourselves as complementing the banks, and being in a position where we can provide banking services to Australians right across the country,” he said.
Unhappy bank customers
When it comes to competing with the banking sector – Maitland’s comments about partnering with a multitude of banks notwithstanding – there are several points in Australia Post’s favour, suggested East and Partners’ Paul Dowling.
“One is that customers are not happy with the lack of choice and lack of apparent competition; secondly, there are offshore banks actively exploring a market entry here. They include a couple of the Japanese banks, a number of Asian banks and, strangely, a couple of the Euro banks,” Dowling said.
“But we wouldn’t see Australia Post building a balance sheet and lending it.”
 Andrew Maitland, Australia Post |
In ranking Australia Post the fourth most effective UPS in terms of meeting its major challenges, OSC made several observations, including the following: “There have been calls for Australia Post to increase the scope of its services (especially to support independent post-offices). Australia Post has been quite innovative in the services it offers, including services of wider socio-economic relevance.
For example, it recently launched an alliance with Rural Bank to offer a wide-range of banking services through rural post offices.
“Australia Post is also responding to changing customer needs by, for example extending opening hours for parcel collection, re-modelling post offices and trialling parcel collection terminals for ’24 x 7’ collection,” noted the consulting firm.
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Agribusiness banking
This was very much the approach outlined by Maitland, who compared his business to a services supermarket’, one where customers can choose from a wide variety of services from a variety of suppliers, utilising Australia Post’s massive distribution network.
He added that the post office network has branches in many country towns which are not well-served by the banks. And it is through this network that “Post”, as its insiders like to call it, has a natural advantage.
“For many years now we’ve been providing basic banking services such as deposits, withdrawals and balance inquiries for up to 70 financial institutions.
These services are offered at about 3,200 locations,” said Maitland.
Some examples of the banking services on offer through Australia Post’s branches include supporting ING Direct which, due to its focus on online banking in this country, may have missed some consumer segments who prefer to have an “in person” experience when opening accounts.
“So, intending customers can download a form for say, a term deposit and bring that into any of our 3,200 enabled outlets and complete the transaction – including any AML [ant-money laundering] checks that are needed.”
Another example is an agreement with Rural Bank, one that allows customers across the county to have access to banking services through a standard agency model (deposits, withdrawals and balance inquiries). “They are also able to open transaction accounts and term deposits. As well as this, in 130 locations, customers are able to speak to a Rural Bank lending representative,” said Maitland.
“Our staff will be trained to identify a lead but they won’t be doing the lending transaction.”
In another move into financial services, Australia Post, in conjunction with Visa, has developed its own branded “Load and Go” pre-paid cards, which can be used for online purchases while limiting exposure to losses – and that plays into Australia Post’s core strategy of boosting parcel delivery.
Insuring the future
Maitland also noted that Post has recently launched its own brand of travel insurance in partnership with specialist insurers CoverMore. Travel is a great category for a vertical integrated business line, as he explained: “Customers have been coming to Australia Post for a long time to get their passports – at last count we process well over 90 per cent of all passports issued in Australia, plus we’re one of the only organisations outside of Great Britain that can issue UK passports.
“We do a very large number of passport photos, and we’ve also done a lot around the mail, such as mail holding or redirection.
“In recent years we’ve also been growing our foreign currency services through products like pre-paid travel cards and over-the-counter foreign currency [sales]. We do it at zero commission, which makes it extremely competitive.”
And in what Maitland said was a further meeting of the digital world and old-fashioned service, he noted that customers can order and pay for the desired currency online and collect it the next day at an Australia Post branch.
So successful has this integrated travel-based sales strategy been that American Express has come knocking on the door, and has signed up for 200 outlets at designated Australia Post stores around the country.
Payments, not mortgages
Along with BPay, the Australia Post payment system has been recognised as the only way for over-the-counter bill payments. “But equally we’ve been looking at the emerging online payments market,” said Maitland. “And that is why in
December 2010, we purchased SecurePay.
“It’s a core part of our plan to expand our digital capability. What it does is offer payment gateway services to utilities, local governments and online merchants.
So it lines up with our traditional bill payments [services], expands our online presence, and it helps support us in our parcels e-commerce strategy, as it generates more parcels business, crucial for the future success of our business.”
Sadly for those still hoping for a true fifth pillar to emerge from left field, Australia Post will not be offering mortgages. “We don’t see ourselves expanding [in that business]. Where we do see our next move is into superannuation,” said Maitland.
That’s one area of business that makes good use of the enterprise’s distribution network and payments capabilities. To this end, Post has recently entered into trials with AMP. “We’re essentially providing an avenue for AMP’s small business customers [with less than 20 employees] who want to pay their superannuation guarantee contribution s to AMP – one practical way to reduce their administration costs,” Maitland said.
Payment of the super guarantee has been a very manual process in the past, and smaller businesses are the ones least likely to have the systems and governance processes to support direct online contributions – particularly when contributions need to be split between multiple employees. This situation gives Australia Post the opportunity to support both sides of the transaction.
“The employer can come in with a single cheque and we can help them split the contributions for each employee – it really helps them get through that [administrative barrier].
Branded ATMs
Australia Post is trialling a small number of its own branded ATMs and self-service terminals, building on the work of the major supermarkets in conditioning their Australian customers to use such equipment at check-outs.
Both systems are supplied by NCR. “These are early days for us, and the trial is to see if there is demand for them. It’s not an arrangement with any of our existing ATM providers or banks,” Maitland said.
- Categories
- Banking
- Tags:
- Australia Post, Ahmed Fahour, Andrew Maitland, Paul Dowling
- Author:
- Bernard Kellerman, bkellerman@financialpublications.com.au
- Article Posted:
- February 15, 2012
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