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Globally, the way our customers’ want to use our services is changing. The highlighted case study (see below) from our Australian region illustrates these changes and how we have responded.
| The changing face of banking |
| Every day NAB processes more than 4.3 million transactions for customers in Australia. This figure has doubled in the past eight years. |
| The way Australian customers want to use our services has also changed significantly |
- Internet banking transactions have more than doubled over the past four years
- Since 1997, the number of transactions at branches has declined by more than 50%. The rate of this decrease has slowed in the past four years — transaction volumes are down 13% since 2001
- Since 2001, the volume of transactions at ATMs has declined by 12% while telephone banking transactions and enquires have increased by around 35%
- Direct debit transactions doubled between 1997 and 2001, but have since remained steady
- EFTPOS transactions increased by 40% between 1997 and 2001, and have since remained steady.
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| How have we responded? |
A number of recent changes by NAB reflect customers’ changing needs:
- In June 2004 we introduced flat-fee banking accounts with unlimited NAB transactions, including Internet transactions
- Internet security has been improved, including the recent introduction of additional optional customer authentication, called SMS payment security
- 655 of the 1,550 NAB ATMs have been audio enabled for vision impaired and elderly customers
- More than half of NAB’s banking outlets (excluding giroPost) are in rural and regional areas
- Transactional banking facilities have been introduced, adding more than 3,000 banking locations around the country through Australia Post giroPost outlets. As at June 30 we had 3,049 giroPost outlets, an increase of 27 outlets from the same time last year.
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| District Manager Neil Hodgetts and Branch Manager Sharon Bates admire the new banking hall at Fargate branch in Sheffield, United Kingdom. |
In the UK, a major review of our distribution strategy and branch network resulted in the decision to close approximately 60 Clydesdale Bank branches and 40 Yorkshire Bank branches over a 12–18 month period. This decision reflected the changing needs of our customers and the different ways they are banking. We are also building a network of Financial Solutions Centres (FSC). As at 30 June 2005, 11 new FSC’s were opened and 39 existing business centres were converted to become FSC’s. Along with the nine FSC’s that were already in operation, there are now a total of 59 FSC’s. Additionally, focus is being given to small-business banking and investment in direct channels including improving Internet and telephone banking services, the expansion of the ATM network and our alliance with the post office which includes more than 14,500 outlets.
Learning from our customers
Customer feedback helps us provide service and develop products that meet customers’ changing needs. We use a number of feedback channels, including customer research and formal complaints-handling processes, to better understand the views and needs of our customers.
Customer research
In 2005, we conducted more than 75,000 interviews globally with customers regarding branch and customer service and in excess of 100,000 interviews with customers regarding service provided by personal or business relationship managers. Feedback from these interviews was provided to service delivery and product development teams and, where relevant, was incorporated into staff performance reviews.
For example, following customer feedback in the UK, new processes were developed for a product to allow existing customers to upgrade and open accounts via the telephone. This process includes the use of e-identity — an on-line personal identification tool, which allows us to check a customer’s identity and comply with all legal requirements with minimal inconvenience to the customer.
In addition to these customer interviews, New Zealand and the UK also conducted customer value research to understand better the customer experience. Results from our research help to identify key customer issues. In short, our customers have told us they want us to be more responsive, make faster decisions and understand their needs better. Personal banking customers have made it clear they want to avoid hassles and unnecessary costs. Business customers place a high emphasis on the quality of their overall relationship with the Group. Further information on the views of our customers gathered through our complaints management processes is detailed below.
Another important part of our customer research is consultation with key stakeholder groups such as peak consumer bodies and community-based organisations. These organisations help us to develop and provide products and services that are inclusive and able to meet the needs of all customers. Details of our stakeholder engagement approach are provided in the Stakeholder Engagement section of this report.
Complaints management
We have worked hard to improve the way we manage customer complaints. Each of our businesses has a specialised team focused on managing customer feedback and complaints. Complaints are a valuable source of feedback as they tell us how to improve our products and services, so we can meet our customers’ needs and expectations more effectively.
In 2005, these complaints management teams have made changes and improvements to complaints-handling processes that include:
- improved management reporting and identification of systemic problems and complaint trends
- increased staff training to highlight the importance of prompt complaint resolution
- improved procedures for the escalation of complaints, including clear procedures for handling external dispute resolution complaints and the provision of financial remedies
- improved file review and monitoring processes in the UK.
Banking complaints
Figure 17 highlights the top five banking complaint themes for each of our regional business. It shows us that complaints regarding ‘customer service’ and ‘fees and charges’ are common throughout all regions. We are pleased that complaints regarding charges have decreased in the UK, while in New Zealand complaint percentages have decreased across each of the top five themes. However, in Australia, the number of complaints has increased from 2004. This is in part due to improvements in our complaints management processes, which mean that we are capturing a greater number of customer issues. Our Australian data also shows that we received an increase in complaints as a result of a number of events that occurred during the year including overcharging of government taxes and Choice package fees. Our response was to openly admit our error and refund the fees collected
Wealth management complaints
Figure 18 highlights the top five wealth management complaint themes for each regional business. In Australia, the ‘quality of our service’ and the clarity of our ‘fees and charges’ are of concern. In the UK, the main area complaint is associated with ‘advice’.
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Complaints to the Ombudsman
Another measure of our customer service performance is the number of complaints reported to the relevant industry ombudsmen.
Table 9 highlights the number of complaints referred to the banking ombudsmen and financial services (wealth management) dispute resolution bodies. We are pleased that complaints to ombudsmen and external dispute resolution bodies have decreased in the UK, across both banking and wealth management. New Zealand and Australian data show an increase in wealth management complaints to external dispute resolution bodies. In Australia, a majority of these complaints relate to the assessment of insurance and death benefit claims.
| Table 9: Complaints referred by customers to the Ombudsman |
| Banking complaints referred by 2005 customers to Ombudsmen |
2005 |
2004 |
| Australia |
642 |
736 |
| United Kingdom |
183 |
265 |
| New Zealand (inc. wealth management complaint to Ombudsmen) |
116 |
108 |
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| Wealth management complaints referred by customers to dispute resolution bodies |
2005 |
2004 |
| Australia |
193 |
163 |
| United Kingdom |
67 |
168 |
| New Zealand (inc. banking complaints to Ombudsmen) |
116 |
108 |
Privacy commissioner
Customer privacy is very important to us and this is reflected in our Customer Charters and in the privacy policies we publish on each of our regional businesses’ websites. In 2005, a number of privacy cases were referred to the respective privacy commissioner in New Zealand and Australia. In the UK, there were no cases referred to the Privacy Commissioner.
In New Zealand, three cases were referred from the Privacy Commissioner. Two files were closed without further action and in the third matter, information has now been made available to the individual making the complaint and the file closed. In Australia, we received three complaints of privacy breaches via the Office of the Federal Privacy Commissioner. One of these complaints resulted in NAB changing a long-held practice of compulsorily collecting a customer’s marital status in order to establish a new account. We worked with our customer who lodged the complaint and the Office of the Federal Privacy Commissioner to come to a more acceptable practice and it was decided that this information is no longer relevant or representative of social structures. The Commissioner was unable to come to a ruling regarding a privacy breach in the remaining two complaints.
Customer service
In 2005, we have implemented a number of programs to help us respond to customers’ needs and to improve our customer service. As these initiatives, described below, were implemented late in the reporting period, we will report against them in our 2006 CSR Report.
Our commitment to customers
In our 2004 CSR Report, we made a commitment to develop a Customer Charter. In 2005, we established a Group-wide Technical Advisory Committee to develop Charter guidelines so that each regional business and IMS could develop a Customer Charter reflecting the specific needs of their customers. The guidelines were developed after benchmarking Charters produced by other organisations and some consultation with key external stakeholders.
Using these Group guidelines, Customer Charters have been developed. As a minimum, each Charter includes:
- commitments to same high standard of service at all times
- the type of service customers can expect to receive from us, how to contact us and provide feedback, particularly if things go wrong
- a commitment to publicly report each year on our performance in line with the Charters.
Weblinks for the Customer Charters released to date in Australia, the UK and by IMS are in the Contact Us section . Bank of New Zealand is scheduled to release their charter in early 2006.
In New Zealand, 15-point codified service standards were introduced for all BNZ staff in April 2005. These set out the standards of service required of BNZ employees in responding to employees and customers, and covering five areas, which are ‘accuracy’, ‘expertise’, ‘professionalism’, ‘relationship’ and ‘simplicity’. The service standards, which have been heavily promoted throughout the organisation, reflect internally, the commitments being made in BNZ’s Customer Charter.
Customer quality program
In 2003, we piloted a new customer quality program in New Zealand based on the six-sigma concept. Since late 2004, this has been rolled out in Australia and the UK. The purpose of this program is to increase customer and employee satisfaction, fuelling business growth and enhancing our reputation.
The core objective of the quality program is to embed a culture of ‘getting it right first time, every time’. It will also help us to develop simple and effective organisational policies, systems and processes to enable our employees to achieve this goal. The program is clearly aligned to our strategy of simplifying the business and returning authority and responsibility to our branch managers and frontline employees.
Inclusion and accessibility
Some people find it difficult to access financial services because of one or a combination of financial, physical, geographic and cultural factors. We recognise that our customers come from communities of diverse background and have made a commitment to treat all customers fairly and with respect. This means it is important to provide products and services to customers who traditionally may have been ‘excluded’ from financial services due to remote locations, or low or uncertain incomes, such as those who receive government benefits.
Financial inclusion
We have developed a number of products and services designed to provide these customers with access to basic financial services and to assist in improving their quality of life. Some examples of these products include micro-credit and affordable banking services. We have also undertaken special training for employees so we can recognise customers who are experiencing financial hardship.
Providing micro-credit
Micro-credit is the provision of small loans to individuals on low incomes who do not qualify for traditional mainstream bank products. Micro-credit is best known for its use in developing countries to facilitate wealth creation. In Australia, NAB has been promoting the use of micro-credit principles and practices as an effective mechanism for alleviating poverty. Over the last year, activities have increased because 2005 was declared as the United Nations International Year of Micro-credit. In particular we have:
- engaged with government in areas where our micro-credit product, stepUP loans, is offered
- been an active representative on the Australian United Nations Year of Micro-credit Committee
- created opportunities for members of both State and federal governments to discuss micro-credit and its benefits and support micro-credit programs
- engaged the media on micro-credit
- sponsored micro-credit conferences.
No interest loans
In Australia, we support a pre-existing community-based micro-credit scheme called the No Interest Loans Scheme (NILS®4, an initiative of Good Shepherd Youth and Family Service [Good Shepherd]). NILS has successfully operated for over 25 years and involves a network of over 230 community groups around Australia. NILS offers small loans of up to $800 to individuals on government benefits for the purchase of whitegoods. In 2005, NAB has continued to support NILS by sponsoring Good Shepherd‘s annual NILS conference (in particular travel costs to help community groups come together), as well as partially funding the administration costs of the network. In addition, NAB has been advocating the importance of NILS to government and other corporates.
4 NILS is a trademark registered to Good Shepherd Youth and Family Service.
stepUP Loans
In 2003, our Australian business also worked with Good Shepherd to develop and deliver stepUP loans, a micro-credit product that compliments NILS by providing a product which bridges the gap between NILS and an unsecured personal loan. stepUP aims to migrate customers from NILS to mainstream financial products. The stepUP loan is a NAB product distributed by Good Shepherd. The loans are for $800–$3,000 and are for up to three years at a fixed interest rate of 7.15%, the current rate for new stepUP loans as at 30 June 2005. The program is currently being piloted in five NILS locations – three in Victoria and two in NSW. To qualify for a loan, a customer must be a recipient of government benefits and have lived at their current address for at least six months. The first loan was drawn down in October 2004 for a second-hand vehicle.
Although we have received over 170 inquiries for the loans, the conversion to loans has been slow with 15 stepUP loans as at 30 June 2005. Our experience suggests that this may be due to the following factors:
- the target market is not used to interacting with banks and does not use typical bank communication channels. Word of mouth is the most effective form of referral.
- many individuals have poor credit histories. Therefore, we have adjusted credit criteria so that individuals with small debts on their credit file may be eligible for a stepUP loan, providing they commit to clearing the existing debt over time.
In response, we have developed a community-based communication program in plain English, run several stories in the media profiling loan recipients and met with local government and other community-based organisations to get them involved in the program.
| Student card |
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 Students sometimes experience difficulties meeting their financial needs. That is why BNZ has created a product called Campus Pack to assist in meeting this need. Campus Pack offers a transactional account that is electronic, fee free and has no monthly base fee. It also provides lending facilities with discounted interest rates and no application fees. The bank decided to go one step further to assist students with their financial worries and in July 2003 started working with StudentCard New Zealand to develop a debit card version of its student discount card.
In February 2004, we launched a product called BNZ StudentCard debit card which is the only offer of a discounted student banking package with EFTPOS that doubles as a free StudentCard in New Zealand. StudentCard, which normally costs $20, if bought directly from StudentCard, is free as part of BNZ Campus Pack. Campus Pack has been received well by students. We have experienced a 41% increase in these accounts in the last 12 months indicating the product is meeting students’ financial needs. For further details, refer to:www.studentcard.co.nz/ or BNZ website:www.bnz.co.nz/campuspack.
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Affordable transactional banking
In the UK, the Government has developed an initiative to ensure banks provide disadvantaged people with access to basic financial service products. In response, we have developed two accounts that allow these customers to deposit money and access direct payment facilities. We have also introduced a scoring system for credit products, which applies responsible lending principles to assess whether our customers can manage their debt.
In Australia, we offer a Concession Card Account that does not have any account-keeping fees or minimum balance requirements. It is offered to pensioners, health care cardholders and Veteran Affairs cardholders. The number of concession card accounts held at 30 June 2005 was 32,653. This represents an increase of 15.34% since 2004. This account allows $40 of fees to be rebated each month. This is equivalent to approximately 13 over-the-counter transactions.
Hardship training
NAB recognises that life is full of uncertainties and that customers’ circumstances can change when they face adverse and unexpected situations. During the year, we provided call centre staff with training to help them identify signs of financial hardship more easily. More than 140 call centre staff in Melbourne have now completed the training, which was designed and provided by Good Shepherd Youth and Family Service.
In August 2004, we also sponsored a two-day conference on financial hardship in the Northern Territory. The conference focused on better understanding the financial issues faced by the area – particularly indigenous communities in remote areas. The head of our Collections team attended the conference and provided participants with an understanding of NAB’s collection processes.
Physical inclusion
Providing access to all our customers is important. We have a number of initiatives in place to assist those customers with physical disabilities, including the provision of audio enabled ATMs and making sure our buildings and facilities meet or exceed disability access requirements in UK and Australian legislation.
Audio enabled ATMs
In Australia and the UK we are continuing to audio-enable our ATM networks to assist vision-impaired, dyslexic and elderly customers. In the UK, we were the first bank to deliver audio-enabled ATMs. At 30 June 2005, we had two audio-enabled ATMs in the UK, with 20 additional machines planned for deployment in 2006. In Australia, as at 30 June 2005, 650 ATMs were audio-enabled and by the end of 2006 all ATMs in the network will be audio-enabled.
Disability access
In the UK and Australian regions, it is a regulatory requirement to have plans in place to ensure branches meet the needs of customers with a disability. In both regions, we have put disability action plans in place to meet these regulatory requirements and to ensure that the design of our branches and other facilities provide easy access for those customers with a disability.
In Australia, greater than 80% of our ATMs provide disabled access. In the UK, 61% of our ATMs are fully compliant with Disability Discrimination Act regulations. All new ATMs installed in each region support disabled access.
NAB is the first bank in Australia to create braille-encoded templates to assist vision-impaired customers to complete bank withdrawal slips, deposit slips and cheques. The templates are available at every NAB branch across Australia, and can also be requested through groups such as Blind Citizens Australia.
Servicing rural and regional areas
Rural and regional communities have specific needs, often due to their remoteness and dependency on primary industry, in particular agribusiness. To ensure our customers in rural and remote locations have access to banking and wealth management products and services, we have a number of programs in place. In Australia, we reduce fees and charges for branch banking services where our customers are not within 25 km of an ATM. See the highlight box for some statistics on our services in rural and remote locations.
| The challenges of locations |
| Australia |
642 |
| Number of Agribusiness customers, globally |
134,285 |
| Number of rural branches charging reduced fees in Australia |
173 |
| Percentage of Australian branches in rural and regional |
53% |
| Number of customers who use rural and regional branches with reduced transaction fees in Australia |
90,000 |
| Fees forfeited across branches in rural areas that charge reduced transaction fees in Australia |
$1.8m |
| Number of giroPost outlets in Australia |
3,049 |
| Number of postal banking outlets in United Kingdom |
15,000+ |
NAB is a major provider of agribusiness financial services. In Australia, we have an agribusiness team of more than 530 people nationwide. This team is dedicated to providing individual financial solutions to primary producers, processors and service providers located in rural and regional Australia. In 2005, we have delivered a number of initiatives aimed at assisting these customers.
To address the need for competent agribusiness financial planning NAB has introduced a new regionally based specialist agribusiness team. The team is specifically focused on providing expert advice to meet the wealth creation needs of farmers.
Drought relief
In Australia, drought has continued to cause significant hardship throughout 2005. In recognition of this, we have represented rural interests in State and federal advisory boards and received approximately 2,000 applications for increased or restructured funding due to the drought. The majority of applications were approved and customers were provided with a range of restructuring options with concessional fees.
Developing new products
In Australia, we experience significant variation in our weather and this variation is showing signs of increasing with climate change. This creates significant risk for a number of our customer segments including agribusiness, tourism, and utilities such as energy and water. In order to assist our customers to manage financial risks related to climate change and weather variations, we have undertaken research and developed a weather derivative product offering.
This product has now been taken up by a small number of large agribusiness customers and outdoor event organisers. We believe this is a product with significant potential to assist a larger segment of our agribusiness customers, and we are undertaking further work to develop a similar, simpler product for smaller customers.
Cultural inclusion
The cultural diversity of our communities enriches us all, but we acknowledge that language can become a barrier for some customers in gaining access to financial services. On 23 October 2004, NAB launched a multicultural service within our Australian Call Centre. This service connects customers with bankers who speak the same language. Initial languages for this service include Arabic and Chinese.
Financial literacy
The large range of financial products and services available can at times make choosing the right product confusing and difficult. This means that it is very important that we provide product and service information in a form that is simple, accurate and easy to understand. With this in mind, NAB has developed a number of programs to address the issue of financial literacy. These include our new Group-wide ‘Plain English’ program, the budgeting and financial advice and mentoring we provide as part of micro-credit products, and our financial literacy and numeracy activities in the UK.
A key focus of our Corporate Community Investment (CCI) in the UK is financial literacy. We have several projects operating across England and Scotland that support financial literacy, ranging from pre-school through to adulthood.
Financial literacy is also a skill required by some of our business customers where they are dealing with more complex financial concepts, products and services. We have developed some business assistance packages in New Zealand and Australia to help our agribusiness customers.
In New Zealand, we have developed the Farm First Growth Program. This is a business assistance program subsidised by BNZ and offered to farming clients to help them develop the skills to run their businesses better. Since it started in 2002, 1,600 New Zealand agribusiness clients have completed the program.
We have collaborated with a group of universities – Melbourne, Auckland and Massey – and the International Centre for Entrepreneurship – ICEHOUSE, that have developed a Trans-Tasman, 12-day, executive development program aimed at developing financial skills in regional and rural communities. NAB is subsidising participation of Australian farmers in this program. Since 2004, our agribusiness team has subsidised the participation of 21 Australian farmers in the course at a total cost of $84,000.
| Plain English program |
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Providing information in plain English is critical to improving financial literacy in our community. Clear and simple communication will make financial products and services information more accessible and assist our customers in making informed financial decisions.
Our plain English program began in early 2005 in Australia. To date we have conducted research with customers and shareholders on the quality of our documents, developed plain-language tools and resources including an on-line version of a clear communication guide, and delivered our plain English training course to people working in communication roles within our Australian region and Corporate Centre.
As at 1 September 2005, 68 people in Australia had completed the course and more than 100 people will have completed the course by November 2005. The plain English program is ongoing and will be extended further in Australia throughout 2006. Roll-out of the program is soon to commence in the UK and we are also planning to introduce the program in New Zealand. An update will be reported in our 2006 CSR report.
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Fees and charges
Fees and charges continue to be a matter of concern for our customers. In relation to wealth management products and services, customers have expressed concern about advice and fee disclosure. In the area of banking services, customers and customer advocacy organisations have expressed concerns about the level and fairness of fees, particularly in relation to disadvantaged or isolated communities.
Wealth management
Fee disclosure and conflicts of interest are important issues to customers using financial planning and wealth management services. This is particularly important in regard to the behaviour and remuneration of financial advisers.
NAB has recognised these issues and in 2005, as members of the Financial Planning Association of Australia (FPA), we took a lead role in the development of a set of principles to help manage the issue of conflicts of interest for financial advisers. These draft principles have been open to review and feedback from the industry for the past six months and the FPA will finalise and launch these principles in 2006. An expected outcome of these new principles is an improvement in client understanding and in the clarity and transparency of payment and remuneration practices in financial planning.
Banking
The key issues around retail banking fees and charges relate to the level and fairness of fees, particularly for people and communities that are vulnerable or isolated. With this issue in mind, we have developed a range of no or low-fee products and services for people who are financially disadvantaged. These products are detailed in the Inclusion and Accessibility section.
We are committed to keeping all our customers informed in relation to fees and charges. In 2005, NAB demonstrated this commitment when we told our customers and other stakeholders about historical overcharging errors (see case study below).
| Communicating errors |
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In 2005, we announced errors in the way some customers had been charged package fees and Bank Account Debits Tax. These errors led to overcharging of some customers. NAB alerted ASIC, staff and affected customers.
Our Australian CEO, Mr Ahmed Fahour, openly communicated these errors, apologised to our customers and committed resources to address the errors to the satisfaction of our customers and regulators.
The errors were as follows:
- Incorrect charging of package fees – This error relates to the incorrect charging of an annual fee related to certain financial package offers. Based on assessments of records back to 2000, and estimates for the period back to 1994 when these packages were introduced, approximately 55,000 financial packages have been incorrectly charged. Package fee clients who were overcharged are in the process of being reimbursed. Refunds commenced at the end of October 2005 and will continue until March 2006. Our processes have been revised in order to prevent these fees being overcharged in the future.
- Incorrect debiting of Bank Account Debits Tax (Debits tax) – NAB incorrectly collected Debits tax from approximately 140,000 accounts (this consists of 15,000 currently open accounts and 125,000 closed accounts). These are predominantly business customers. Since identifying the problem customers have been reimbursed.
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Fraud prevention
All banks and bank customers can be a target for fraud. The objective in a fraud attempt is usually to obtain cash. The attempt may occur via the use of bank-backed instruments such as bank cheques in apparently legitimate transactions to obtain goods or cash, or via electronic transactions.
Of the many transactions handled daily by our regional businesses, very few are made with the intent to defraud. However, constant vigilance must be maintained to detect the occasions where a request to open an account, cash a cheque, or provide some other service is not quite right and is an attempt to defraud us or our customers.
Our systems globally are designed to restrict the scope for fraud. NAB was one of the first organisations in the world to identify the security breach of around 40 million Visa and MasterCard credit cards. The problem was the result of a virus, which had infiltrated a data processing company. Our detection systems helped us to minimise any loss or inconvenience to our customers from this incident, and we reimbursed our affected cardholders for fraudulent activity on their accounts. Our detection systems operate 24 hours a day, every day of the year.
On 2 May 2005, we launched an improved payment security service for Internet banking customers. This security service uses Short Message Service (SMS) for transactions such as transfer of funds to third parties (eg. bill payments) and is provided free of charge. The optional SMS authentication service is designed to protect customer funds from Internet banking fraud. It works by sending a randomly generated, unique code via SMS to the customer’s mobile phone within seconds of them commencing an on-line payment. The customer enters the code into the payment confirmation screen to complete the payment request.
NAB has a Cheque and Electronic Fraud Investigation Team that operates a fraud detection software program to identify irregular behavioural patterns on all NAB cheque accounts. This increases our chances of identifying fraudulent activity and reduces the risk of loss to NAB and its customers.
Moving forward
Planned actions for 2006 include:
- continuing the implementation of our plain English program and extend it to the UK and New Zealand
- extending plain English–related initiatives for BNZ
- monitoring our customer service performance against our regional Customer Charters so we can report on our performance in our 2006 CSR Report
- reporting on process improvements resulting from our Customer Quality program.
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The Group has a large and diverse customer base of around 7.8 million retail and business-banking customers globally. We also service over 2.3 million wealth management customers and policy holders8. In our 
