David Gonski remains cautious of dangers in BNPL

Former ANZ chairman David Gonski. Picture: Getty Images

David Gonski’s final board meeting as chairman of ANZ just under a fortnight ago signed off on the bank’s 2020 annual results. The board also endorsed CEO Shane Elliott’s strategy to stay well clear of the buy now, pay later business. In contrast, Commonwealth Bank is in bed with US firm Klarna and Westpac with Afterpay.

Mr Gonski’s take is telling, particularly as the lines between BNPL and banking are blurring and in the light of all the concerns raised at the Hayne royal commission.

“I do believe that it is a good thing that people have the ability to borrow when they need it,” he said.

“But they also need the education to understand what that means — that you usually have to pay it back, that you have interest and you have a period to do that.

“If that is all adhered to, I don’t have a problem.

“But being a player in the business for a long time, buy now, pay later schemes usually fall down on one of those.

“And if you looked at the figures — and I’ve seen them — more people who go into a buy now, pay later situation, effectively as a borrower, think it is interest free. Well of course it can’t be interest free. It doesn’t work, even at low rates of interest, it can’t be interest free.”

BNPL is growing very fast with ambitious expansion plans for the US market, sometimes not with the individual borrowing limits common in Australia. So is it just possible that BNPL could prove to be a systemic risk to the financial system, the next subprime?

“Well, if it gets to a stage where people are borrowing more than they really can afford to do, of course it can have ramifications,” Mr Gonski said.

“But having said that, I don’t want to dramatise it, because at the moment it is not an enormous part of the borrowing and lending situation.

“But I believe over time it has got to be well looked at and I think policed, to make sure that it is done probably.”

BNPL is growing very fast with ambitious expansion plans for the US market, sometimes not with the individual borrowing limits common in Australia. Picture: AAP

Where Mr Gonski does see opportunity is in investment banking. In the past six months, there has been a major upheaval in the sector with the poaching of some of Australia’s top corporate advisers from big houses to set up boutique banks. After ANZ, he looks poised for a new chairmanship at hot new outfit Barrenjoey Capital.

Boutique investment banks are low on overheads but their agile, high-powered teams can cut the lunch of traditional players.

Mr Gonski brings a network honed over decades in corporate boardrooms giving him extraordinary pull across the top floor. For now, he is not committing to a start date.

“I think it’s wrong to make a decision while you’re doing something that is very intensive. I have finished (at ANZ) and I will make up my mind and I will let people know when I’ve done that.”

But no doubt he sees opportunity in the fragmented investment banking space.

“That’s a situation that has been around for years. I remember in 1990, when people were starting up all the boutiques. I started up one. We saw an opportunity and then they all got bigger and of course they got bought by the bigger people and off they went again, this is a sort of pendulum.

“At the moment there is a lot of work to be done in the financial industry. (There’s) some very clever people, and I think some will do very well out of it.”