On Consumer Banking and Finance

Continuing my Canadian observations in Australia series (I really need a real name for these… there are still about 5 or 6 of them left, most of which were written months ago)…  consumer banking and commerce is one of those areas that are actually more nationally-divided than the others.  This is logical: both Canada and Australia leave the regulation of finance and commerce to the federal governments, for the most part.

Card technology

Most businesses in Australia accept EFTPOS (Electronic Funds Transfer at Point Of Sale).  The system is in most ways similar to Canada’s Interac network, though most debit cards in Australia actually bear the logo of Visa or MasterCard.  The major difference I’ve noticed is that it’s much, much, more common for people to use the smartchip / PIN options in Australia (though that’s changed a lot over the last few months – I initially made this observation last year and Canada is slowly catching up), with some vendors (like the CityRail network) requiring it.  Almost all vendors will ask “PIN or sign?” at the cash, and I would say about 90% of the time my Canadian PIN actually works in Australia, though the other 10% of the time the card still works if we choose “sign,” and at least half the time it automatically knows that my Canadian Visa or MasterCard is a credit card and not debit.

While I can’t really point to any tangible differences, it felt easier to pay with a card in Australia than in Canada.  Perhaps it’s that I could always use a PIN (with the exception of the rare time it doesn’t work) when I paid, which saved the hassle of signing a receipt that will end up in the garbage at the end of the day anyway.  Or perhaps it’s that there is no perceptible difference between a debit and a credit transaction, a standard that makes the transaction go smoother.  This is actually the only thing I’ve noticed that hasn’t improved in Canada – I’ve had numerous transactions since returning to Canada where I’ve flashed my card in order to use the chip, and the clerk has had to cancel the transaction after realising it was credit not debit, since the clerk is still apparently responsible for telling the machine which it is.  In Australia, the machine will prompt the customer to choose Chequing, Savings, or Credit Card (or will automatically, and correctly, detect which it is), whereas Canadian machines seem to only know if the person behind the counter tells it.

Online access

While accessing my bank account online in Australia is done very similarly to banking in Canada (with the added inconvenience of having to enter my password by clicking on the image of a “keyboard” on the login screen, exposing it to anyone who happens to be nearby if I’m connecting anywhere other than home), the options once I connect are quite different.

First, there’s BPay.  BPay is sort of a universal method of bill payment, similar to paying bills online in Canada (and certainly it’s used for that), but you can also use it for numerous other transactions, from paying rent (it’s practically required by all landlords), to making online purchases.  The system, at least with my bank (Westpac), is a little clunky, but it certainly does the job.  And it sure as hell makes transactions easier – many Australians my age have never seen a cheque, whereas most Canadians my age still use cheques to pay their rent and for various other things.  This is changing, slowly, for personal and small business transactions where Interac e-Transfers can be sent, but the process is expensive, dollar-limited, and virtually impossible to convince someone to use if they don’t already use it.

Many online retailers (and airlines, hotels, etc) in Australia also give you the option of paying directly out of your bank account through various login connections.  This is again something that’s available in Canada, but highly uncommon (in fact the only time I’ve seen this as an option is on the Canada Revenue Agency’s MyPayment feature).  Combine this with the fact that in Australia your debit card is also actually a Visa or MasterCard, and debit transactions online are easy, and commonplace.  Forget PayPal, forget having to get approved for a credit card you don’t need just to shop online, you just use your bank account, pay for the transactions right away (in some cases the transaction will show up in your online banking instantaneously), and you’re done.  It’s so easy it hurts to think this ever didn’t exist, or that it doesn’t work this way in Canada.

The one big downside of online transactions in Australia, though, is sometimes the cost.  Many online retailers, as well as online and offline travel providers (especially hotels and airlines), charge a service charge which on some flights can be almost $10 per transaction.  There are often ways around this – for example, when I booked a flight with Tiger Airways, I avoided the credit card charge by paying directly from my Westpac bank account using the MasterCard number on my debit card – any other form of payment would have incurred their service charge.  But it’s gotten to the point that even Virgin Airlines charges $3.50 per flight due to “industry practice,” which gets really annoying as a traveller – I’d much rather they just include the cost in the price and be done with it.  I’ve stayed at a number of hotels, also, that have added a 3% credit card surcharge for all transactions – which adds up quickly.

Currency

Despite cards being quite easy in Australia and most people having one, it’s much more common for people to pay with cash than it is in Canada.  In combination with the formerly low-value of the currency (not true anymore, unfortunately), this usually means that making a $4 purchase with a $50 bill doesn’t even attract the slightest bit of attention, unless they happen to not have enough change.  This makes buying things right after an ATM visit incredibly easy, but also means carrying a lot of cash.

Australia got rid of its penny in the early 1990s, and apparently New Zealand (having eliminated both its penny and its 5-cent coin), Bosnia, Brazil, Finland, Hungary, Malaysia, The Netherlands, Singapore, Sweden, and Switzerland all have similar rounding systems.  The smallest coin is worth 5 cents, and I rarely see one – usually the smallest coin I encounter is a 10 cent coin, just based on the way prices fall.  The vast majority of retailers now charge prices that are multiples of 5 cents to avoid any complication, though some grocery stores (particularly for products that are measured by weight) and fast food outlets (Oporto comes to mind, as everything on their menu ends in an 8) have stated prices in odd numbers.  When the total bill comes to something other than a multiple of 5 cents, they either charge the exact amount if you’re paying by EFTPOS (debit or credit), or round to the nearest 5 cents otherwise (down if it ends in 1, 2, 6, or 7, up if it ends in 3, 4, 8, or 9).  The difference is noted on your tax invoice (what we would call a receipt in Canada) as rounding and that’s that.

As someone who used to make a point of removing pennies from my wallet whenever I got home, accumulating them until I had 50, and rolling / depositing them rather than carrying them all around, I love this.  It just makes things easier.  And, from what I’ve heard on this in the recent Canadian discussions, would actually save the mint money because pennies cost more to make than they’re worth.

The big argument against this is that it could somehow unfairly benefit retailers.  But really, so what?  The best rough estimate I can find is that the entire fast food industry (globally) has about 80 billion transactions a year.  If every country in the world adopted this, and they made 2 cents on each transaction (which is highly unlikely), that’s $1.6B a year in a $173B/year industry.  I know it seems like a lot, but those are global figures, and the fast food industry probably has more transactions per $ of revenue than most others.  Not to mention the fact that even if they strategise their pricing to get as much rounding as possible, different combinations of prices will lead to them gaining only 1 cent, 0 cents, or losing 1 or 2 cents on any given transaction so that’s an unlikely total figure – plus, if you throw in debit / credit transactions that eliminate the rounding altogether the difference gets quite small.  But most relevant – much as I value my money, I’m really not bothered if it rounds up 2 cents.  Do I really think that purchase I was willing to spend $5.98 on couldn’t possibly be worth $6.00?  No, that’s just silly.

Sales tax

This system of rounding is most effective because of Australia’s GST system.  Australia’s GST is, in most ways, very similar to Canada’s.  The states don’t charge sales taxes, though, so there’s just a standard 10% GST rate across the country.  They have very similar sets of input tax credit rules, that is, the rules that ensure the GST is a value-added tax by allowing businesses that charge GST on their sales to claim back GST paid on their inputs, to ensure that ultimately the sale is only taxed one.  They seem to go further and allow retailers to be eligible even on non-taxable goods, though there are far fewer exceptions to GST than in Canada.

With the strong Australian dollar, some media have focused on their personal import rules lately.  Australia’s import rules are far more flexible than Canada’s – online purchases imported with a value of less than $1,000 don’t attract GST, whereas in Canada the limit is $20.

The real advantage, though, is that the sales tax is included in the price.  What you see on the shelf (or the sticker) is what you pay at the till.  With no exceptions, other than, it seems, telecom providers who itemise GST separately but always quote the tax-in price.  This helps aid the penny issue – if you charge tax-in prices, you aren’t stuck with rounding awkward numbers after applying sales taxes.  This is entirely allowable in Canada (provided you disclose that GST/HST is included in the price) – but very few businesses actually do it.  Before HST, this sort of made sense as provincial tax rules didn’t always allow “tax-included” pricing, but now that HST exists in most parts of the country, tax-in pricing only makes sense.  It makes sense for consumers who would like to know how much we’re actually going to pay when we leave the store, and it makes sense for businesses who want to avoid that sticker-shocked American who discovers their bill to be an extra 5-15% higher than they thought.

Banking

Opening an account in Australia was relatively easy – certainly no more difficult than in Canada, anyway.  The usual presenting of your photo ID, signing of a few forms, and so on. What blew me away was the $5 service fee (which entitled me to unlimited transactions) on my transaction account were waived for the first six months, and continue to be waived as long as I have a minimum amount of deposits into the account per month – if I were using it to accept payroll deposits, this would easily be accomplished with $24K/year after-tax income.  They automatically set me up with paperless statements, online banking, and all the things that are so basic and yet so incredibly difficult for the Canadian banking industry to comprehend, let alone implement.  Canada is so, so, so, far behind on going paperless it’s embarrassing – I’ve gotten most of my accounts (eventually) switched over to paperless, but ScotiaBank still insists that they’re require by law to mail me my line of credit statement in addition to giving me an electronic copy that is identical.

Even more exciting, was that Westpac also opened for me a no-fee savings account (the only transactions I can do with it are into or out of my transaction account, which is really what a savings accounts should be used for), that gives me 5% interest per year. 5%!  Granted, this is reflective of the prime rates in Australia, which have not dropped as far as they did in Canada, but I can’t even imagine a standard savings account offering anywhere near this rate in Canada even under better economic conditions.

Returning to Canada has made me miss a lot of these things… I’m still shocked when I get to a checkout counter and their machines don’t accept chip cards, not to mention the harsh reminder that things cost an extra 12% more than the prices say they do.  And having to get used to both cheques and pennies again has been excruciating.  We are stuck in the wrong century.