Customer benefit –

value and values

Goal four: deliver customer-owner benefit.

Quality competitive product and service

bankmecu will use its strong balance sheet and financial performance to maximise customer benefit by delivering quality value-for-money financial products and services with a level of memorable superior service.

Product responsibility

bankmecu products aim to reflect bankmecu’s responsible values, appeal to bankmecu’s strategic markets and enhance economic, social and environmental wellbeing. This requirement is written into the formal product development process.

bankmecu regards resource scarcity, climate change and biodiversity loss as key ethical, social, environmental and economic issues. As a provider of finance, bankmecu appreciates its obligation and opportunity to influence action that reduces pressure on these issues and is committed to making a positive contribution to finding long-term solutions.

Product mix 

  June 2012
(%)
June 2011
(%)
June 2010
(%)
LOANS MIX      
Personal 1.76 2.07 2.94
First home buyers 15.78 17.64 17.36
Interest only 9.28 9.20 8.91
Variable 250K+ 14.29 13.78 12.61
500K+ variable 13.36 12.25 11.39
Standard variable 26.89 28.92 30.91
Total mortgage variable 79.59 81.79 81.18
       
Mortgage fixed 0–1 yr 3.39 1.76 2.68
Mortgage fixed 1–2 yr 1.62 2.13 1.26
Mortgage fixed 2–3 yr 0.83 1.32 1.94
Mortgage fixed 3–5+ yr 1.12 0.54 0.43
Total mortgage fixed 6.96 5.75 6.30
       
Credit cards 0.74 0.62 0.64
Overdrafts 2.53 2.80 3.24
Total revolving credit 3.27 3.42 3.88
       
Commercial 8.42 6.96 5.69
       
DEPOSIT MIX      
       
Access accounts 25.68 30.16 30.16
Cash management account 1.38 2.06 2.06
Cyber Saver and high-yield accounts 21.56 21.07 21.07
Deposits at call 48.62 53.29 53.29
       
Fixed term 51.38 46.71 46.71

Lending activity

Commercial lending has increased over the past 12 months into core strategic socially entrepreneurial areas such as education and community housing. Personal loans and continuing credit facilities continue to contract as a percentage of the total portfolio.

Personal vs Commercial sector portfolios
  Personal Change % Commercial Change %
  2012 2011   2012 2011  
Customers 123,085 119,298   6,417 5,915  
Deposits $1,845,324,204 $1,664,314,417 10.88 $634,556,702 $514,694,473 23.29
Loans $2,073,102,279 $2,031,470,520 2.05 $176,897,610 $134,864,654 31.17

Growth in the commercial sector outpaced that in bankmecu’s personal sector portfolio and highlights both significant potential and latent demand. Business in the commercial sector has been retained and developed with a combination of relationship managements, product innovations and competitive pricing.

Commercial loans product mix 
Industry sector % of total loans
Affordable housing 4.10
Aged housing 0.40
Agriculture, forestry and fishing 0.10
Construction 0.30
Disability 0.00
Education and training 0.90
Government and government services 0.30
Health care and social assistance 0.10
Manufacturing 0.20
Rental, hiring and real estate services 0.90
Services 0.90
Transport, wholesale and retail trade 0.20
Total 8.42

 Commercial loans product mix data was collected this year for the first time.

Wealth protection activity 

Insurance Gross written premium 2011/12
($)
Gross written premium 2010/11
($)
General insurance 16,910,617 17,556,256
Consumer credit insurance 2,147,066 2,407,656

Future product and service development

bankmecu has improved e-communications, electronic statements, internet banking security, SMS/email alerts, mobile rediATM and service centre locator and internet banking for mobile phones. Customer feedback taken from the Customer Insights Survey highlighted a high level of satisfaction with these services. bankmecu will continue to develop and promote electronic communications.

Additional identified initiatives to be investigated in the coming 12 months include:

  • a new simple super product
  • a responsible investment product
  • a review of transaction fees and the everyday savings account
  • a new basic home loan product
  • PIN change; and
  • enhanced mobile banking services including and iPhone and Android apps.

Call centre service performance

During 2011/12, the National Service Centre received 256,749 calls actually answered by staff. Of these, 83.74 per cent were answered by a staff member within 40 seconds of the customer selecting the appropriate option.

bankmecu also received 1,063,510 calls to its automated banking service, Interactive Voice Response (IVR).

Information on customer compliments and complaints can be found here.

Competitive pricing benefit

bankmecu will maintain, quantify and communicate its annual customer benefit.

As part of its budgeting and ongoing pricing reviews, bankmecu will ensure sufficient pricing advantage for customers, compared to the four major banks, so as to deliver a per annum pre-tax pricing benefit of at least 10 per cent of the Bank’s start-of-year reserves.

Customer benefit dividend

bankmecu aims to deliver its customers a superior level of pricing when compared to Australia’s four major banks. Each year, bankmecu employs an independent financial services research group, Canstar Cannex, to determine how much customers save in total by choosing to bank with bankmecu.

The Canstar Cannex figure is determined by comparing the pricing on bankmecu deposits, loans and transactions to that of the average pricing offered by the four majors. The Canstar Cannex valuation equates to a pre-tax internal customer benefit returned to customers in the form of competitive interest rates and fees.

Annual customer benefit 
  2011/12 2010/11 2009/10 2008/09 Difference b/w 10/11 & 11/12 (%)
Customer benefit dividend ($ millions) 20.14 31.17 31.52 24.05 –35
Average customer benefit ($) 155.35 231.60 220.60 210.07 –33
Customer benefit return on reserves (%) 7 12 15 13 –42

In 2011/12, Canstar Cannex determined the overall customer benefit to be $20,143,396. The decrease from last year is mainly attributed to a reduction in benefit from term deposit rates, where the four major banks have been pursuing market share based on a more aggressive pricing strategy. This has eroded the pricing gap that previously existed. Notwithstanding the decrease, the Board is pleased with the level of benefit to customers from the competitive pricing of products. Customers remain $20.143m better off overall with their deposits and loans invested in bankmecu as opposed to the four major banks.

Customer benefit by product segment 
Product Annual customer value 2011/12
($1000s)
Distribution: customer value
(%)
Annual customer value 2010/11 ($1,000s) Distribution: customer value
(%)
Difference b/w 10/11 & 11/12
(%)
DEPOSIT PRODUCTS
Rate based analysis 4,710 23 12,931 41 –64
Transaction based analysis 1,365 7 1,742 6 –22
Total deposit products 6,075 30 14,674 47 –59
           
LENDING PRODUCTS
Rate based analysis 11,843 59 12,087 39 –2
Lending fee analysis 2,224 11 4,403 14 –49
Total lending products 14,067 70 16,490 53 –15
Total annual value 
  2011/12 2010/11 Difference b/w 10/11 & 11/12
(%)
Total annual value ($) 20,143,396 31,165,189 –35%
Total number of customer 129,662 134,565 –4%
Total annual value per customer ($) 155 232 –33%

Note: customer figures were provided to Canstar Cannex in May.

The data indicates that each bankmecu customer is on average $155.35 per annum better off by banking with bankmecu than banking with the four major banks. This return is in addition to the contribution to customer wealth through the addition of profit to capital reserves.

Fair and reasonable fees

bankmecu charges transaction fees on the basis of the costs a customer generates by their transaction behaviour; it ensures a fee-free banking option remains available, and it rewards customers for their support. Cost recovery complies with Reserve Bank of Australia (RBA) expectations of clear cost-related pricing of respective payment channels to facilitate consumer choice.

During 2011/12, the costs of providing payment access services totalled $6,128,834 (2010/11: $6,565,953). The total transaction fees paid by customers to cover these costs was $5,411,846 (2010/11: $5,460,157) representing a subsidy to users of payment services of $716,988 (2010/11: $1,105,796).

Annually, bankmecu conducts an assessment to ensure its fees charged for any debt default work and related credit or other services (e.g. transaction fee for exceeding available funds) represent cost recovery for the service provided or the work caused.

Social and environmental benefits

bankmecu will maximise customer and community benefit through a responsible approach to banking, which includes responsibly investing of customers’ funds for constructive economic, social and environmental performance.

bankmecu will continue to keep its direct administrative operations carbon neutral.

Ethical investment and lending

bankmecu seeks to avoid any negative social and environmental impacts arising from the Bank lending funds or investing customers’ savings in an unethical or socially and environmentally destructive manner. bankmecu has in place an Ethical Lending and Investment Policy, which guides the Bank’s activity.

bankmecu is fully compliant with the responsible lending obligations of the National Consumer Credit Protection Act (2009) and welcomes changes that further protect consumers.

bankmecu staff are also encouraged to keep up to date with emerging trends in ethical investment and lending best practice.

bankmecu recognises the need to invest customers’ money responsibly.

As at 30 June 2012, approximately 90 per cent of all customers’ deposits were lent to other customers. The remaining 10 per cent of customers’ deposits and accumulated cash reserves were predominantly invested across a range of cash securities – term deposits and negotiable certificates of deposit.

A small proportion of bankmecu’s accumulated cash reserves are invested in other financial institution shares, Australian bank covered bonds, in Australian residential mortgage-backed securities and bank floating rate notes.

bankmecu holds shares in its subsidiary companies and is a shareholder in its two major service suppliers – Cuscal (a provider of wholesale and transactional banking services) and Data Action (a supplier of core banking and data network facilities). The Board considers all Company policy in exercising the Bank’s right to vote on behalf of customers.

The bank has a comprehensive training program for all its lenders and ensures that all lending is done in a responsible manner where the interests of both bankmecu and the customer are aligned.

Value of lending with an environmental and social benefit

EMS target: To increase the proportion of products and services used by customers with an environmental or social benefit by 10 per cent in 2014/15, relative to 2009/10 – in progress.

bankmecu defines ‘total value of lending with an environmental and social benefit’ as lending to customers and organisations where the outcome improves the environment and/or social capacity and circumstance.

bankmecu has developed loan products with specific environmental and social benefits in mind, and these are tracked in the banking system. Individual loans with positive environmental and social benefits are also tracked.

bankmecu loans with environmental and social benefit  
  2011/12 2010/11 2009/10
ENVIRONMENTAL
Balances ($) 49,169,242 47,133,857 48,866,823
Number of accounts 2,436 2,456 2,639
% of portfolio 2.19 2.16 2.38
SOCIAL
Balances ($) 474,105,348 432,014,746 364,941,630
Number of accounts 1,664 1,604 1,427
% of portfolio 21.07 19.77 17.76
OTHER
Balances ($) 1,726,725,132 1,706,390,471 1,641,411,628
Number of accounts 39,938 42,044 46,657
% of portfolio 76.75 78.08 79.87

Most of the loans in the environmental class are personal loans or car loans. Balances in these loan types have increased marginally over the past 12 months in line with increased car loan lending.

Lending with a social benefit has increased 9.7 per cent. This is a smaller increase from last financial year (18.4 per cent) mainly due to reduced lending on preferential terms to first home buyers. This reduction is due to lower demand in the market from first home buyers.

The value of environmental and social loans as a percentage of the total loan portfolio has increased by 3% since 2009/10. The number of environmental and social loans as a percentage of the total loan portfolio has increased by 1% since 2009/10.

Products and their features

bankmecu lending policy requires careful consideration as to whether customers can afford the repayments on their loan, which minimises any possibility the loan will cause hardship. bankmecu does not provide pre-approved increases in credit limits on credit cards or provide incentives which encourage customers to increase their level of spend on credit cards.

Environmental

bankmecu has developed a number of products with features specifically designed to encourage borrowers to make more environmentally responsible choices:

  • goGreen® Car Loan, providing pricing incentives for safer, energy efficient cars as well as the offset of carbon emissions generated by all cars financed during the term of the loan
  • goGreen® Home Loan, providing pricing incentives for the construction of 7 star + houses
  • eco-pause, providing home loan feature to encourage the installation of energy and water efficient appliances within the home
  • biodiversity offsets for new home construction loans
  • environmentally responsible plastic debit and credit cards
  • electronic statements or double sided customer mailed statements; and
  • an e-communications.
Social

bankmecu also provides features with loan products that enhance social wellbeing:

  • Premium First Home Buyers Loan, providing a low ongoing interest rate and other socially and environmentally responsible home loan features. For example, Family Loan Repayment Pause and Eco Loan Repayment Pause
  • project finance for community housing organisations
  • banking for the community sector
  • banking for students, offering incentives for younger customers to save
  • Family Loan Repayment Pause, providing a loan pause when a new child enters a family
  • a rebate of $200 for car loan borrowers 25 and under who take an advanced driving course
  • 100 per cent No More Marketing Guarantee on all credit card products
  • conservative credit approval policies to ensure borrowers can afford debit;
  • assistance for borrowers experiencing financial hardship; and
  • exemptions from transaction fees and charges for community sector organisations and disadvantaged individuals.
goGreen® Car Loan

In Australia, transport is a significant contributor to total greenhouse gas emissions, making up 15.65 per cent in 2010, up from 14.6 per cent of emissions in 2008.

Source: http://www.climatechange.gov.au/en/climate-change/emissions.aspx

bankmecu recognises the need to reduce impacts indirectly caused by motor vehicle financing. As a result, bankmecu developed the award-winning goGreen® Car Loan.

The goGreen® Car Loan encourages people to purchase more environmentally efficient cars. The more energy efficient the car is, the better the interest rate on the loan. bankmecu also offsets the greenhouse gas emissions produced by the car, based on average annual vehicle emission figures, for the term of the loan.

The amount of greenhouse gas emissions offset for cars financed by bankmecu is in accordance with guidance received from Landcare Australia that the average car in Australia produces 4 tCO2-e per year. bankmecu offsets greenhouse gas emissions by restoring and protecting trees, which in their lifetime will absorb enough tCO2-e to offset the greenhouse gas emissions generated by cars financed.

To find out more about bankmecu’s Conservation Landbank, visit.

Since 2008, bankmecu has offset greenhouse gas emission through the Bank’s Conservation Landbank.

Greenhouse gas emissions 
Period Greenhouse gas emissions (CO2-e) offset
(tCO2)
1 January 2008 – 30 June 2008 5,255*
1 July 2008 – 30June 2009 9,248
1 July 2009 – 30 June 2010 9,512
1 July 2010 – 30 June 2011 8,732
1 July 2011 – 30 June 2012 8,516
TOTAL 41,263

 *This figure is calculated by Greenfleet methodology which uses 4.3 tonnes of CO2-e per average car. bankmecu is now working with Landcare Australia, who provided guidance of 4 tonnes of CO2-e per average car.

To date, bankmecu has committed to offset 41,263 tCO2-e in the Conservation Landbank for cars financed. This is equivalent to 10,000 cars being taken off the road for one year.

Annual number of goGreen® Car Loans funded

Due to competition in the car loan market and changes in the purchasing habits of Australians towards smaller cars, bankmecu reviewed the pricing structure of the goGreen Car Loan product, which was structured around the dominance of large cars. At the same time the Bank took the opportunity to enhance the responsible features of the product.

On 1 September 2011, bankmecu made changes to its car loan product to reward customers for purchasing safer cars as well as environmentally friendly vehicles. Since these changes were made, a majority of car loans were advanced for vehicles highly rated for either safety or environmental features, or both.

bankmecu provides a $200 rebate for car loan borrowers up to 25 years who choose to take an advanced driving course.

bankmecu car loans by vehicle characteristics in 2011/12 
  Loan value
($)
Percentage
ANCAP 5-star 4,787,013 33.0
Greenhouse rating 7+ 1,998,547 13.8
ANCAP 5-star plus Greenhouse rating 7+ 1,421,737 9.8
Neither rating 6,313,892 43.5
goGreen® Motor Insurance

In partnership with Allianz, bankmecu’s insurance underwriter, customers can purchase goGreen® Motor Insurance.

Reduced premiums are calculated on the basis that the car insured will be driven by no more than two nominated drivers who are 25 years or over and will not be driven more than 10,000 kilometers during the period for which it is insured.

bankmecu secured 108 GoGreen Motor Insurance policies for customers through Allianz in 2011/12.

goGreen® Home Loan

Homes constitute the largest purchase most people will ever make and involve a wide range of economic, environmental and social impacts. Homes are responsible for approximately 13 per cent of Australia’s energy use and contribute approximately 10 per cent of Australia’s greenhouse gas emissions.

Source: http://www.climatechange.gov.au/what-you-need-to-know/buildings/homes.aspx

Homes rated 7 stars or more qualify for bankmecu’s goGreen® Home Loan, which offers all the same benefits as bankmecu’s Premium Home Loans, but with a lower interest rate. The reduced interest rate provides an incentive to customers to purchase more energy efficient homes.

bankmecu funded seven goGreen Home Loans in 2011/12 with a total amount advanced of $1,894,950 (average $270,707).

goGreen® Home Improvement Loan

bankmecu’s goGreen® Home Improvement Loan offers a discounted interest rate on loans for the purchase and installation of environmentally friendly features into a home. This loan product was created to encourage people to install features in their homes including, but not restricted to, solar panels and wind electricity generation, grey water recycling systems, insulation and rainwater tanks.

bankmecu funded 34 goGreen® Home Improvement Loans in 2011/12 with a total advanced amount of $411,956 (average $12,116). This product was discontinued in April 2012 and combined with a new personal loan product called the Homebuyers Personal Loan. For customers performing sustainable improvements to their home, an interest rate discount is provided. Seven Homebuyers Personal Loans were funded with this discount totalling $69,347 (average $9,906).

Environmental loan repayment pause

In 2008/09, bankmecu introduced an environmental home loan repayment pause for those customers currently servicing a loan who wish to make energy and water efficiency improvements to their home. Existing borrowers are able to delay home loan repayments for three months or halve repayments for six months to enable the purchase of home improvements that will increase the energy and water efficiency of their home. bankmecu is not aware of any other financial institution anywhere in the world offering this feature.

bankmecu approved nine environmental loan repayment pauses in 2011/12, equating to over $61,000 in loan repayments that were allocated to meeting the cost of home improvements.

Biodiversity offsets for new home construction loans

In 2008/09 bankmecu introduced the provision for a biodiversity offset for new home construction loans. The bankmecu Conservation Landbank allows bankmecu to offset the loss of biodiversity resulting from new homes constructed through bankmecu finance. Further information about bankmecu’s Conservation Landbank is provided.

In 2011/12, bankmecu provided 100 properties with a total land area of 78,622 square meters offset and a loan value of $33,447,897.

Environmentally responsible plastic cards

bankmecu was the first financial institution in Australia to launch a credit card using PETG plastic, as the result of a pilot program led by Cuscal and Placard. The use of PETG rather than PVC enables the virtual elimination of chlorine and a range of other highly toxic chemicals from the card production process.

Further development has been undertaken in conjunction with Cuscal and Placard to test PETG as being suitable for Paywave contactless cards and the next generation of chip technology (DDA chip). The PETG plastic has yet to be made suitable for thicker chips and development is ongoing. Research into other plastics is also being undertaken.

bankmecu cards are now a mixture of PETG plastic and standard plastic.

Premium First Home Buyers Loan

bankmecu’s Premium First Home Buyers Loan offers a low variable interest rate for people who qualify for the First Home Owners Grant. It allows first homebuyers to borrow up to 95 per cent of the valuation amount.

The loan was introduced to assist first homebuyers enter the property market.

According to Australian Bureau of Statistics (ABS) data, the number of first home buyer commitments, as a percentage of total owner-occupied housing finance commitments, sat at 17.8 per cent in May 2012 (May 2011: 15.4 per cent).

Source: http://www.abs.gov.au/ausstats/abs@.nsf/mf/5609.0

bankmecu advanced 182 loans to first home buyers, totalling $51,360,914, in 2011/12. This represented a fall in lending to first home buyers of 28.1 per cent, and is largely a result of soft real estate market conditions experienced since the start of 2011. The average loan size was $282,202, down from $286,823 in 2010/11.

Community housing finance

Access to safe, secure and affordable housing is an issue of material importance to bankmecu customers and Australian society. bankmecu is working with the community housing sector to provide finance suited to their needs.

As at 30 June 2012 bankmecu loans to the community housing sector totalled $91.7m.

Banking for students

bankmecu’s mySaver product was launched in 2005/06, offering customers aged up to 25 years incentives to save, with bonus interest rates and transaction fee rebates.

As at 30 June 2012, there were 10,863 mySaver accounts with a total value of $16,443,578.

Family loan repayment pause

To ease the burden on growing Australian families, bankmecu introduced a family loan repayment pause for a number of home loan products. The feature allows customers to defer payments on their mortgage for up to three months or reduce mortgage repayments by half for up to six months when a new child comes into the family.

bankmecu approved 56 loan repayment pauses in 2011/12 with an average deferment in repayments of $6,414 per pause.

bankmecu VISA credit card

bankmecu has two credit card offerings:

  • The low-rate VISA credit card, which offers a low interest rate with an annual fee, is suitable for customers who maintain an outstanding balance each month.
  • The 55-day interest free VISA card with no annual fee is suitable for customers who pay off their outstanding balance each month.

bankmecu provided 225 new low rate Visa credit cards with total limits of $1.46m (average limit of $6,500) in 2011/12 and 1340 55-day interest free Visa credit cards with total limits of $5.78m (average limit of $4,314).

100 per cent No More Marketing Guarantee

bankmecu provides all customers with a credit card with a 100 per cent No More Marketing Guarantee, meaning that the Bank does not offer unsolicited credit limit increases, or encourage card holders to increase their credit limit or level of spending. Customers investing money with bankmecu know that when their funds are used to finance credit card debt, this is done responsibly.

Further information about bankmecu’s low delinquency rate can be found here.

From 1 July 2012 the Federal Government launched new credit card reforms requiring providers to refrain from offering limit increases on credit cards unless the customer has agreed to receive them.

For information on the new government reform, visit: www.choice.com.au

Exemptions from fees and charges

bankmecu has an exemption from fees and charges for customers who represent an organisation or group that is recognised by the Australian Taxation Office as a not-for-profit organisation and operates a Community Access Account with a balance of $100,000. bankmecu also exempts fees and charges for any customer who cannot conduct their banking due to a disability.

The total number of accounts exempt from fees and charges in 2011/12: 
Category of account No. of accounts
bankmecu loan packages 231
Schools 131
Not for profits 84
Customers 101
bankmecu accounts 4
TOTAL 551

Carbon neutrality

bankmecu recognises the worsening environmental, social and economic implications resulting from climate change and acknowledges human contribution. bankmecu acts voluntarily to minimise greenhouse gas emissions produced as a consequence of operational activity and has made a commitment to offset residual emissions.

bankmecu’s carbon management strategy is around a framework of:

  • measuring
  • setting objectives
  • avoiding emissions
  • reducing
  • containing
  • assessing; and
  • offsetting.

bankmecu became carbon neutral for the first time in 2011 by utilising the above strategy and purchasing offsets equivalent to the residual emissions generated in the 2010/11 financial year.

This year bankmecu purchased 2002 tonnes of greenhouse gas emission offsets from Climate Positive, a not-for-profit offset provider, to achieve carbon neutral operations.

In addition to bankmecu offsetting its own operational emissions, bankmecu’s print provider Vega Press became 100 per cent carbon neutral in 2009, with greenhouse gas emissions independently audited and verified. Vega purchases sufficient carbon offsets to ensure all the operational greenhouse gas emissions generated during the print production process have been calculated and offset.

As a result, Vega purchased 66.5 tonnes of carbon offsets on behalf of bankmecu to cover the Scope 3 emissions associated with bankmecu’s printed products in 2011/12.

bankmecu also offsets the greenhouse gas emissions from cars it finances

Carbon offset research project

bankmecu has been in discussion with Landcare Australia, Trust for Nature and Greening Australia with regards to the risks and opportunities for biodiversity and carbon offsetting through the Bank’s Conservation Landbank. bankmecu commissioned Greening Australia in June 2012 to provide a carbon analysis of the Landbank, incorporating feedback from Landcare Australia and Trust for Nature. The scope of works includes a comprehensive desktop analysis, a discussion on requirements for accrediting the land bank along with a cost benefit analysis of options for both the existing land bank and future investment considerations both locally and internationally. Considerations include the Carbon Farming Initiative (CFI) eligibility and potential outcomes of natural regeneration of native vegetation and the enhancement of existing remnant native vegetation through infill planting to increase biodiversity. bankmecu has invested $33,900 in this research and is hoping the outcomes will assist to support biodiversity protection in Australia through carbon offset mechanisms.

Further information about bankmecu’s Conservation Landbank can be found here.

Top