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The government has at last decided partially to deliver Australia Post from the Stone Age by freeing the organisation from the commercial-hobbling daily mail deliveries.<\/p>\n
Daily letter delivery is a nostalgic idea that has no place in a modern digital economy.<\/p>\n
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Forget the daily delivery.<\/span>Credit: <\/span>Ryan Stuart<\/cite><\/p>\n Australia Post has, until now, been an entity that time forgot. It\u2019s a legacy organisation with imposed letter delivery service obligations that most Australians don\u2019t use and don\u2019t consider important, let alone vital.<\/p>\n Thus, Australia Post has evolved into an organisation with a split personality. The old daily delivery of mail is one (loss-making) part. The other is a parcel delivery logistics business whose growth prospects are fed by an increase in online shopping. But the profits from the logistics part have not been sufficient to offset the letters\u2019 loss, and we, as taxpayers, foot the bill.<\/p>\n But Australia Post is not the only digital dinosaur struggling to justify a service that a small minority uses.<\/p>\n There are plenty of parallels between the post office dilemma and that of the large retail banks and their branch networks.<\/p>\n It costs the Commonwealth Bank $1 billion dollars a year to run its branches.<\/span>Credit: <\/span>Bloomberg<\/cite><\/p>\n Over the past six years, branch numbers have fallen by more than a third across the country.<\/p>\n It costs Australia\u2019s biggest bank, the Commonwealth Bank, for example, $1 billion to run its branch network each year and another $400 million to supply cash to branches and ATMs.<\/p>\n If one were to extrapolate that, the big four must be spending more than $2 billion a year on a branch network that services maybe 5 per cent of its customer base.<\/p>\n Unlike Australia Post, which is a government-owned business, the banks are not hostage to universal service obligations, but they feel a great deal of pressure from interest groups, a small customer cohort and some sections of the government to keep branches open, particularly in regional and remote areas.<\/p>\n There are a couple of sweet ironies in all this.<\/p>\n In order to reduce the branch footprint, three of the four big banks have been using post offices as a de facto physical presence to allow customers to transact, particularly in regional areas.<\/p>\n Bizarrely, this keeps the Australia Post branches more relevant and probably reduces the cost of the bank branch network. So it has become a mutual propping-up exercise.<\/p>\n And another irony: one of the biggest users of post office letters is the big banks, who send regular statements to their customers.<\/p>\n The bank branch networks now seem to exist for the older generation. By that I mean not the grandparents but the great-grandparents who are aged in their 80s or 90s, and some small business owners.<\/p>\n The 70-year-olds, who have graduated from physical banking to phone banking to digital banking, are generally fine using their bank apps to send money to their grandchildren.<\/p>\n The other branch user cohort is small business, but this group is also shrinking because the vast majority receive digital payments.<\/p>\n The banks say that, these days, their branches are populated by their financial or loan advisers, and neither function requires the banks to deal with cash.<\/p>\n The trend in the reduced use of cash has been clear enough for years. As CBA boss Matt Comyn noted at the Senate regional bank inquiry in September, 43 per cent of all point of sale transactions five years ago were cash. Today, the figure is about 15 per cent. And it continues to fall.<\/p>\n Banks are continuing to close ATMs because the demand for cash is dwindling.<\/p>\n (And witness the number of those small Optus business customers who last month couldn\u2019t trade during the network outage as they were unable to take digital payments.)<\/p>\n The parallels with Australia Post are similar.<\/p>\n As more businesses and individuals communicate by email or text, the average number of letters received by households has dropped from 8.5 a week to just 2.2 a week since 2008.<\/p>\n If one was to remove letters sent by banks and other corporations less than 2 per cent is left.<\/p>\n Letters, like bank branches, are best left to go the way of the dinosaur.<\/p>\n The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. <\/i><\/b>Sign up to get it every weekday morning<\/i><\/b>.<\/i><\/b><\/p>\n<\/p>\n
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