financial literacy inclusion the state of play in research and practice
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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. Why is Financial Literacy and Inclusion important to ANZ?.

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financial literacy inclusion the state of play in research and practice

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


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

what are we doing
What are we doing?
  • Research
    • Causes of Financial Difficulty (2005)
  • Business operations
    • Responsible Lending commitments
    • Progress Loans
  • Innovative community programs
    • Saver Plus
    • MoneyMinded
    • MoneyBusiness


  • Business operations
  • Innovative community programs
1 anz s research into financial difficulty
1. ANZ’s 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?
three core factors

Decreased Income &/ Increased Expenses

Poor Financial Decision-Making

Three core factors

Over-Spending &/ Over-Commitment

Unhealthy Financial Ways of Thinking

Circumstances Out of Individual’s Control

Lack of Skills & Knowledge

what does this tell us
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’
  • ANZ’s focus is to filter the most vulnerable customers from CLI offers


  • Business operations
  • Innovative community programs
a responsible lending
(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
  • ANZ’s performance on these promises is independently audited every 6 months
how are we doing this
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
why are we doing this
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
results so far
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
next steps
Next steps
  • ANZ’s promises is a first step
  • Spotting customers in difficulty
    • proactive offer of assistance
  • New products
    • repayment flexibility
  • Transparency
    • online calculator
b progress loans
(b) Progress Loans
  • Small loans program for people on low incomes (who would not normally fit ANZ’s 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
  • 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.
eligibility and features
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)
roles of the partners
Roles of the partners
  • Brotherhood of St Laurence:
    • Program promotion
    • Participant recruitment
    • Initial assessment of of applicant’s ability to make repayments
    • Check of applicant’s 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
results so far1


Whitegoods 20%


Car rego/ repairs6%



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
results so far2
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


  • Business operations
  • Innovative community programs
innovative community programs
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