Banking in the Bush : a decade of change

Economic Papers (Economic Society of Australia),  March, 2005  by Diana J. Beal,  Sarath Delpachitra

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3 Alternative Delivery Channels

A feature of financial-service delivery in Australia during the 1990s and the four years since has been the growth in electronic delivery methods and a corresponding sharp decline in the use of cheques. While electronic delivery may mean the use of the telephone (either fixed service or mobile) or internet (either fixed or WAP) to enquire about or even commit to a loan, it is the area of transaction-facilitation that electronic channels have been indisputably successful.

Individuals may now obtain cash through ATMs provided by their own or other financial institutions or generic providers such as Cashcard, and they may also get additional cash with purchases made in stores equipped with EFTPOS. EFTPOS allows access to both credit-card accounts or own funds by means of debit cards. Since 1998, when the second study in this series was undertaken, the number of EFTPOS terminals has just about doubled and there are more such outlets available 'in the bush'. Table 1 gives the numbers of ATMs and EFTPOS outlets at 30 June for each year from 1993 to 2003 and the percentage growth in outlets each year. The annual average compound growth rates over the period for ATMs and EFTPOS outlets are 14.7% and 30.4% respectively. However, reliable data are not available on numbers of electronic outlets located in regional areas. (The Australian Prudential Regulation Authority [APRA] publishes data on banking points of presence classified by the degree of accessibility or remoteness of location [the ARIA system], but these data are only available for the years 2001-2003, and the electronic data are acknowledged to be incomplete www.apra.gov.au/Statistics/Points-of-Presence.cfm, accessed June 2004.) Details of the ARIA system may be found at www.health.gov.au/ari/aria.htm, accessed June 2004.

The growth in ATM installations has mainly been in city shopping centres and other places where people tend to congregate, because ATMs are relatively expensive to maintain and service. In order to cut costs, most providers outsource the regular servicing of these machines to the specialist security firms and placement of machines outside substantial centres tends to be sparse. However, rural and remote areas have benefited from the growth in EFTPOS outlets as businesses in these areas have realized the benefits to be gained in their own financial management by having revenue from sales directly deposited to their accounts by electronic means. Additionally, providing 'cash out' facilities can assist with the management of excess cash.

Another aspect of the growth in electronic delivery channels has been the sharp growth in direct entry (both debits and credits) and the decline in the use of cheques. As the RBA noted, "the most important payment systems for consumers and businesses in Australia in terms of total expenditures are the electronic direct entry system and the familiar paper cheque. These two methods accounted for more than 95% of the total value of retail payments in 2002, excluding cash" (RBA, 2003, p. 1). However, over the period 1995-2002, while the use of direct entry increased from less than 15% by value of payments to about 70%, the use of cheques decreased from more than 80% by value in 1995 to about 26% in 2002 (RBA, 2003, p. 2).