Financial Literacy - PowerPoint PPT Presentation
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Title: Financial Literacy
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Financial Literacy Inclusion The state of play
in research and practice
- Guy Mendelson
- Head of Personal Loans
- RMIT Conference Financial Literacy, Banking and
Identity - 25 October 2006
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Why is Financial Literacy and Inclusion important
to ANZ?
- Improved Financial Literacy and Inclusion can
assist in responding to long-term strategic
issues - Widespread staff support for financial literacy
initiatives because of relevance to what we do
every day - Staff rated Community involvement as our third
highest current value in the 2006 Engagement
survey
A more informed market place lessens market
failures which prompt regulation
Empowered and confidentconsumers more deeply
engage with financialinstitutions
Rebuilding ourreputation
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What are we doing?
- Research
- Causes of Financial Difficulty (2005)
- Business operations
- Responsible Lending commitments
- Progress Loans
- Innovative community programs
- Saver Plus
- MoneyMinded
- MoneyBusiness
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- Research
- Business operations
- Innovative community programs
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1. ANZs research into financial difficulty
- Conducted qualitative research into the causes of
financial difficulty in 2005 - Part of our updated quantitative research into
the levels of financial literacy - To respond to the growth in household debt in
Australia and address questions about the
marketing practices of lenders - Qualitative research focused on the 2 of the
population who - feel out of control and
- have borrowings of some type
- What are the core factors causing financial
difficulty and what is the role of the lender?
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Three core factors
Over-Spending / Over-Commitment
Circumstances Out of Individuals Control
Unhealthy Financial Ways of Thinking
Lack of Skills Knowledge
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What does this tell us?
- Financial difficulty most often due to behaviour
and traits of the individual or unexpected events
(or a combination) - lack of financial skills and knowledge is only a
small factor - many in difficulty had good financial literacy
skills but they were over-ridden by unhealthy
ways of thinking - People particularly vulnerable where they do not
have the capacity to deal with financial pressure
when it arises - Lenders can indirectly influence the path to
financial difficulty - CLI offers provide the opportunity to access
credit where customer has pre-existing unhealthy
ways of thinking - it must be OK if the lender sent it to me
- ANZs focus is to filter the most vulnerable
customers from CLI offers
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- Research
- Business operations
- Innovative community programs
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(a) Responsible Lending
- The revised ANZ Customer Charter includes new
responsible lending promises (introduced
November 2005) - Primarily aimed at credit limit increase offers
- ANZ will
- not offer a CLI to those with poor recent credit
performance or struggling to meet repayments - not offer a CLI to customers whom we know are on
a fixed income (eg. receiving a government
benefit) and - with any CLI offer, outline how much the minimum
monthly repayment would increase if the offer was
accepted - ANZs performance on these promises is
independently audited every 6 months
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How are we doing this?
- Credit card customers go through an enhanced
filtering process - they will not receive a CLI
offer if - they have been repeatedly overdue in the last six
months - they have made only minimum payments (or slightly
above) for the last 6 consecutive months - they have an ANZ deposit account receiving
Centrelink, DSS or DVA benefits - they have a deeming account or other ANZ account
specifically designed to receive benefit payments - Remaining customers go through a second filter
based on behavioural scores - eliminates customers with unreliable credit
behaviour over previous 12 months or those
showing signs of struggling with repayments
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Why are we doing this?
- We have an obligation to lend only to those
customers we believe can repay - Consistent with running a sustainable business
- to ensure acceptable level of debt losses
- to meet community expectations that we lend
responsibly - Driven by our research into the causes of
financial difficulty which tells us - lenders have a role in causing financial
difficulty - for the most part financial difficulty is not
caused by a lack of knowledge or information - excluding the most vulnerable is more likely to
be effective than increasing disclosure or asking
for more details
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Results so far
- Pool of customers who would otherwise have
received a CLI offer reduced by around 11 - Breaking this down
- 5 reduction due to exclusion of customer making
late or only minimum payments - a further 6 reduction due to exclusion of
customers on fixed incomes - Improving data matching exercise
- Verifying Government benefit codes to identify
eligible customers
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Next steps
- ANZs promises is a first step
- Spotting customers in difficulty
- proactive offer of assistance
- New products
- repayment flexibility
- Transparency
- online calculator
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(b) Progress Loans
- Small loans program for people on low incomes
(who would not normally fit ANZs lending
criteria) - Developed in partnership with Brotherhood of St
Laurence, recognising their expertise and proven
track-record in microcredit - Developed following research conducted for ANZ by
Chant Link and Associates into levels of
financial exclusion in Australia - Around 6 of adults have minimal financial
access, owning only a transaction account - Around 120,000 people, or 0.8 of the population,
could be considered totally excluded with no
financial products - Launched in May 2006 and in 2007 ANZ and the
Brotherhood plan to expand the partnership to
other community organisations across Australia
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Objectives
- Affordable and transparent cost comparable to
standard personal products and mainstream
consumer protections - Sustainable financially viable in the long term
- To build scale effectively targeted to reach as
many eligible consumers as possible this also
contributes to financial sustainability - Inclusive loans on normal commercial terms so
participants can build a good repayment history,
a sense of social inclusion and confidence to
apply for future mainstream credit.
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Eligibility and features
- To be eligible, individuals must
- be on a low income with a Health Care or Pension
Card - be up-to-date with their bills
- have lived in their current residence for a
minimum of six months - Progress Loans features
- between 500 and 3,000
- loan term ranges from 6 months to 3 years
- pilot interest rate of 12.70
- one-off approval fee of 40 applies
- Loan purpose
- household items (including whitegoods)
- education or self-improvement
- medical and dental purposes
- motor vehicles (including registration and
insurance)
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Roles of the partners
- Brotherhood of St Laurence
- Program promotion
- Participant recruitment
- Initial assessment of of applicants ability to
make repayments - Check of applicants ID and income
- Explain product features and requirements to the
applicant - ANZ
- Review the credit history and record of the
applicant - Receive initial assessment from the Brotherhood
and make the formal credit decision based on
modified credit approval criteria - Provide the funding and training for dedicated
loans assessors at the Brotherhood - Loans advanced under the program are fully funded
by ANZ
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Results so far
- On track to meet December 2006 objective
- Loan purpose
- Key reason for declinals negative credit bureau
record - Brotherhood encourage these customers to obtain
the bureau information and coach them in how to
rectify this situation
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Results so far
- Customers are more careful and considered with
their personal finances than mainstream customers - This has ensured that no delinquent portfolio
activity has occurred - ANZ needs to employ a different approach when
liasing with these customers more education
focused
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- Research
- Business operations
- Innovative community programs
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Innovative Community Programs
- Saver Plus
- Financial literacy and matched savings program
- Helped 668 families together save 617,000 in
2003-05 - Being expanded from four to 18 regions, with a
goal to involve 5,400 people between 2006 2009 - Delivered with Brotherhood of St Laurence, The
Smith Family, Berry Street Victoria and The
Benevolent Society - MoneyMinded
- Adult financial education program delivered by
financial counsellors and community workers - 15,279 participants in past 12 months
- Goal to reach 20,000 over next 12 months
- MoneyBusiness
- Money management initiative in six remote
Indigenous communities in WA and NT - Delivered with the Dept Family, Community
Services and Indigenous Affairs
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