Why CBA should be embarrassed for charging for cash withdrawals

Australia’s biggest bank has learnt an important lesson in how not to irritate the public and politicians, especially when it comes to a decidedly “consumer unfriendly” measure amid a cost of living crisis.

On Tuesday, Commonwealth Bank (CBA) said it would move all customers with a “Complete Access” account to a “Smart Access” account, which includes an “assisted withdrawal fee”. This $3 fee would be charged every time a customer took cash out from bank branches, post offices or arranged a withdrawal over the phone, but not when they took out cash from ATMs.

Were there significant cost savings or revenue to be garnered by CBA choosing to charge some of its customers a fee to withdraw cash? Whatever those numbers may be, they are not immediately apparent.

Or perhaps, CBA boss Matt Comyn badly misread the room. Even if this wasn’t Comyn’s brainchild, it was a blunder under his watch, so he bears the ultimate responsibility.

CBA’s decision to move some customers to accounts that charge a fee for withdrawing cash from branches is a blunder under CEO Matt Comyn’s watch. Credit: Dominic Lorrimer

It’s a pretty gutsy move for any large company to announce a hit to the hip pocket of consumers, no matter how minor, at a time when politicians from all sides are falling over themselves to champion the cause of the cash-strapped public. Belting big business, particularly consumer-facing ones, is widely seen as a vote winner, and those voices will only get louder as the next federal election draws near.

Labor’s Financial Services Minister Stephen Jones was first out of the blocks on Tuesday calling CBA’s move a “kick in the guts” for customers, accusing the bank of taxing Australians who want to access their cash and adding that the government won’t stand for it. Other politicians joined the chorus soon after.

CBA’s subsequent decision on Wednesday to partially walk back the proposed $3 fee for cash withdrawals from its branches is its version of damage control. It’s not a backflip, but the bank is slowing the introduction of the proposed changes and will now consult individual customers who will be affected.

Treasurer Jim Chalmers has welcomed CBA’s decision, but in just under 24 hours the bank’s brand has taken plenty of damage.

Anyone with access to a microphone and a decent social media following has been screaming about the greedy bank being un-Australian, tin-eared to the financial plight of many of its customers and opening the gate for other banks to follow.

And with CBA boasting the largest retail customer base of any bank in the country, it’s easy to see why its move drew such swift rebuke from all quarters. The head of CBA’s retail banking services Angus Sullivan told A Current Affair on Tuesday night the last thing the bank wanted to do was upset customers.

But that’s precisely what it has done. The idea was a serious miscalculation – and its architects shouldn’t be looking for a bonus this year.

It looks likely that no one inside the CBA understood the blowback risk of the move, particularly how it measured up relative to the financial reward.

One weird thing about the whole affair is CBA’s suggestion that migrating the 1 million customers who have a “Complete Access” account to the “Smart Access” account won’t generate much if any revenue and won’t make a dent in the $400 million a year it costs the bank to handle cash.

The main reason for this is the vast majority of CBA customers using either account don’t actually take out cash from the branch. Those who use cash can still access it from the ATM or from other places like supermarkets without paying the $3 fee. And vulnerable customers like pensioners and under-18s will be exempt.

Additionally, the monthly account-keeping fee is lower on the “Smart Access” account than on the “Complete Access” account.

So if it’s not about making money, why do it at all?

It looks like CBA’s main motivation to migrate customers to “Smart Access” accounts is more of a housekeeping exercise, aimed at streamlining the number of different transactional accounts.

Presumably, this will cut some costs, but any savings would unlikely be enough to make up for the embarrassment the bank has suffered.

All banks would love to see the end of cash, but it’s a radioactive issue.

Keeping it flowing through the system comes at an estimated cost of more than $1 billion a year and is part of the reason banks need to keep open expensive branches. Meanwhile, the federal government has already declared that retaining the ability to transact with cash for essential goods would be mandated.

So, the dwindling percentage of CBA customers that want to access cash via branches are effectively being subsidised by those who bank digitally.

The banks would like to speed up the process of banking becoming a fully digital affair, but CBA has found out the hard way how quickly a simple and mostly benign change to transaction accounts can become a debacle.

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