1 00:00:03,380 --> 00:00:06,640 Sean Aylmer: Welcome to the Fear and Greed Daily Interview. I'm Sean Aylmer. 2 00:00:06,650 --> 00:00:09,620 Sean Aylmer: 20 years ago, the smaller end of the banking sector 3 00:00:09,619 --> 00:00:12,980 Sean Aylmer: in Australia looked very different. The sector was awash with 4 00:00:12,980 --> 00:00:17,509 Sean Aylmer: credit unions and building societies. Fast forward to 2021, Teacher's 5 00:00:17,510 --> 00:00:21,140 Sean Aylmer: Credit Union is now Teachers Mutual Bank. Queensland Police Credit 6 00:00:21,140 --> 00:00:24,770 Sean Aylmer: Union is now QBank. Heritage Building Society became Heritage Bank. 7 00:00:25,000 --> 00:00:28,240 Sean Aylmer: Greater Building Society became Greater Bank and the list goes on. 8 00:00:28,640 --> 00:00:31,790 Sean Aylmer: Many of them found the change improved customer appeal and 9 00:00:31,790 --> 00:00:34,710 Sean Aylmer: they've also broadened the eligibility for people to bank with them. 10 00:00:35,180 --> 00:00:37,580 Sean Aylmer: One of the banks to make the change was Defence Bank, 11 00:00:37,580 --> 00:00:41,840 Sean Aylmer: formerly Defence Force Credit Union. Since changing in 2012, the 12 00:00:41,840 --> 00:00:45,260 Sean Aylmer: bank's growth has accelerated and has now passed three billion 13 00:00:45,260 --> 00:00:48,440 Sean Aylmer: dollars in assets. David Marshall is the CEO of Defence 14 00:00:48,440 --> 00:00:50,600 Sean Aylmer: Bank and my guest this morning. David, welcome to Fear 15 00:00:50,600 --> 00:00:51,019 Sean Aylmer: and Greed. 16 00:00:51,680 --> 00:00:53,330 David Marshall: Morning, Sean. Hi to your listeners. 17 00:00:53,960 --> 00:00:55,760 Sean Aylmer: Take me through the history of Defence Bank. 18 00:00:56,600 --> 00:01:00,950 David Marshall: Defence Bank was founded in 1975, in fact, at Victoria Barracks 19 00:01:00,950 --> 00:01:03,529 David Marshall: on St Kilda Road in Melbourne, and it was founded 20 00:01:03,530 --> 00:01:08,119 David Marshall: on the principle that many veterans returning from the Vietnam 21 00:01:08,120 --> 00:01:13,160 David Marshall: conflict were increasingly dissatisfied with the big banks. And so 22 00:01:13,459 --> 00:01:16,580 David Marshall: as a result of that, Defence Bank has grown and 23 00:01:16,580 --> 00:01:18,650 David Marshall: was founded and has grown to where it is today 24 00:01:18,650 --> 00:01:22,970 David Marshall: and gone through various phases of growth and investment. And 25 00:01:22,970 --> 00:01:28,009 David Marshall: now we're sort of a medium-large size mutual bank with 26 00:01:28,010 --> 00:01:31,370 David Marshall: a wonderful field of membership with the Australian Defence Force 27 00:01:31,370 --> 00:01:34,089 David Marshall: and in everything that sits around that ecosystem. 28 00:01:34,819 --> 00:01:37,940 Sean Aylmer: Okay, so just tell me, why did the Defence Force Credit 29 00:01:37,940 --> 00:01:40,940 Sean Aylmer: Union, and it is typical of many credit unions and building societies 30 00:01:41,209 --> 00:01:43,910 Sean Aylmer: in that it became a bank, what was it that 31 00:01:43,910 --> 00:01:47,360 Sean Aylmer: caused so many organisations to decide to take on a 32 00:01:47,360 --> 00:01:48,280 Sean Aylmer: banking licence? 33 00:01:48,840 --> 00:01:50,900 David Marshall: Yeah, look, I think there were a number of reasons, 34 00:01:50,900 --> 00:01:54,650 David Marshall: but I think the principal reason was that increasingly I 35 00:01:54,650 --> 00:01:59,000 David Marshall: think society and the community was struggling to understand what 36 00:01:59,000 --> 00:02:02,270 David Marshall: a credit union was, what a building society was, and 37 00:02:02,270 --> 00:02:04,820 David Marshall: how that all connected with what a bank was. And 38 00:02:04,820 --> 00:02:07,660 David Marshall: I think that the great thing about shifting to a bank, 39 00:02:07,660 --> 00:02:11,750 David Marshall: you remove that ambiguity or confusion, but you still maintain 40 00:02:11,750 --> 00:02:17,270 David Marshall: that wonderful virtue of being member-owned or customer-owned and everything that 41 00:02:17,270 --> 00:02:21,320 David Marshall: we make goes back into products and services for our 42 00:02:21,320 --> 00:02:26,420 David Marshall: members or customers, unlike the listed banks who obviously have 43 00:02:26,419 --> 00:02:29,750 David Marshall: to provide products and services but also pay shareholders. 44 00:02:30,320 --> 00:02:32,690 Sean Aylmer: Okay, so that's a really critical point. And you talked 45 00:02:32,690 --> 00:02:34,250 Sean Aylmer: about a mutual bank. 46 00:02:34,460 --> 00:02:34,790 David Marshall: Yeah. 47 00:02:34,820 --> 00:02:36,920 Sean Aylmer: What is the definition of a mutual bank? Is that 48 00:02:36,919 --> 00:02:38,120 Sean Aylmer: exactly what you've just said then? 49 00:02:38,389 --> 00:02:41,360 David Marshall: It's really simple. The customers or members own it. That's 50 00:02:41,360 --> 00:02:45,770 David Marshall: the definition. And we, unlike the listed banks, the four 51 00:02:45,770 --> 00:02:50,000 David Marshall: big banks and the listed regional banks, they have customers 52 00:02:50,000 --> 00:02:56,090 David Marshall: and shareholders which can be completely separate and mutually exclusive stakeholders. 53 00:02:56,090 --> 00:02:58,370 David Marshall: Ours are the same. So to be a customer, you 54 00:02:58,370 --> 00:03:01,130 David Marshall: are an owner or a member in our organisation. 55 00:03:01,430 --> 00:03:04,130 Sean Aylmer: And so is your goal to make profit or is 56 00:03:04,130 --> 00:03:08,540 Sean Aylmer: your goal to over the cycle be kind of neutral 57 00:03:08,540 --> 00:03:11,810 Sean Aylmer: or at zero effectively so that all the money you 58 00:03:11,810 --> 00:03:13,870 Sean Aylmer: make basically goes back into products and services? 59 00:03:14,330 --> 00:03:16,220 David Marshall: Yeah, I think the first point is that we've got 60 00:03:16,220 --> 00:03:18,380 David Marshall: a really clear purpose and that is to serve those 61 00:03:18,380 --> 00:03:21,530 David Marshall: that protect us. And given our field of membership, you 62 00:03:21,530 --> 00:03:26,150 David Marshall: would understand what that means. But we are a neutral bank. 63 00:03:26,150 --> 00:03:29,030 David Marshall: We are still governed, regulated the same way as the 64 00:03:29,030 --> 00:03:32,810 David Marshall: big banks. So we still have, you know, quite robust 65 00:03:32,810 --> 00:03:37,910 David Marshall: structured regulatory settings and disclosure regimes like the listed banks. 66 00:03:38,240 --> 00:03:41,990 David Marshall: But again, the important thing is everything that we make, 67 00:03:41,990 --> 00:03:45,260 David Marshall: we return in terms of an investment in products and 68 00:03:45,260 --> 00:03:51,260 David Marshall: services for our members. So we have to be a vibrant, sustainable, progressive, 69 00:03:51,800 --> 00:03:55,760 David Marshall: forward looking organisation. We have to be because otherwise we 70 00:03:55,760 --> 00:03:59,060 David Marshall: can't compete and remain relevant to our members. But the 71 00:03:59,060 --> 00:04:02,060 David Marshall: way we do that is quite different because we reinvest 72 00:04:02,060 --> 00:04:06,050 David Marshall: everything back into our products and services, whereas the listed 73 00:04:06,050 --> 00:04:09,910 David Marshall: banks obviously also need to pay dividends to their shareholders. 74 00:04:10,610 --> 00:04:16,750 Sean Aylmer: Okay, so your customers/shareholders are mostly Defence Force personnel, are they? 75 00:04:17,120 --> 00:04:21,830 David Marshall: The majority are either current serving ADF men and women 76 00:04:21,830 --> 00:04:26,210 David Marshall: or their families and or the surrounding defence ecosystem. So, 77 00:04:26,210 --> 00:04:30,460 David Marshall: you know, employees of defence contractors, for instance, veterans are 78 00:04:30,560 --> 00:04:33,350 David Marshall: a key market as well. So, yeah, that would be 79 00:04:33,350 --> 00:04:36,900 David Marshall: 80 per cent. But our constitutional settings and our field 80 00:04:36,920 --> 00:04:40,039 David Marshall: membership isn't restricted to that. I mean, anybody could bank 81 00:04:40,040 --> 00:04:41,150 David Marshall: with Defence Bank. 82 00:04:41,490 --> 00:04:44,390 Sean Aylmer: OK, so what I'm interested what I'm getting towards is 83 00:04:44,390 --> 00:04:47,120 Sean Aylmer: the last 18 months has been particularly tough for the 84 00:04:47,120 --> 00:04:50,870 Sean Aylmer: banking industry with COVID and home loan deferrals, the small 85 00:04:50,870 --> 00:04:53,839 Sean Aylmer: business loan deferrals. Firstly, do you offer all those sorts 86 00:04:53,839 --> 00:04:56,479 Sean Aylmer: of things? And secondly, the fact that you are based 87 00:04:56,480 --> 00:05:00,110 Sean Aylmer: on a group which has broadly been able to remain employed, 88 00:05:00,110 --> 00:05:02,210 Sean Aylmer: I mean, certainly the majority of your people would have 89 00:05:02,210 --> 00:05:04,520 Sean Aylmer: been able to be employed, so it hasn't hit you as hard? 90 00:05:05,450 --> 00:05:08,599 David Marshall: First and foremost, we're very honoured to be able to 91 00:05:09,110 --> 00:05:12,589 David Marshall: provide the retail banking services to the ADF personnel and 92 00:05:12,589 --> 00:05:16,400 David Marshall: that ecosystem. That's the first point. The second point is that you're right. 93 00:05:16,400 --> 00:05:19,190 David Marshall: I mean, we do have an environment where there is 94 00:05:19,190 --> 00:05:23,180 David Marshall: relatively stable employment in our membership base. So that has 95 00:05:23,180 --> 00:05:25,969 David Marshall: allowed us to navigate the last 12 to 18 months 96 00:05:25,970 --> 00:05:28,700 David Marshall: really well. But we don't take that for granted for 97 00:05:28,700 --> 00:05:32,750 David Marshall: a minute. That's also allowed us to accelerate rapidly a 98 00:05:32,750 --> 00:05:37,520 David Marshall: number of our key strategic initiatives and also to invest 99 00:05:37,520 --> 00:05:41,800 David Marshall: at record levels in technology and people and things to 100 00:05:42,260 --> 00:05:45,620 David Marshall: make sure that we keep pace with the developing needs 101 00:05:45,620 --> 00:05:46,710 David Marshall: of our members. 102 00:05:47,330 --> 00:05:49,490 Sean Aylmer: Stay with me, David. We'll be back in a minute. 103 00:05:54,520 --> 00:05:58,780 Sean Aylmer: My guest this morning is David Marshall, CEO of Defence Bank. OK, 104 00:05:58,779 --> 00:06:01,960 Sean Aylmer: so how do you compete? Is it on price? Is 105 00:06:01,960 --> 00:06:05,080 Sean Aylmer: it on technology? Is it on new products? How does 106 00:06:05,080 --> 00:06:05,560 Sean Aylmer: that work? 107 00:06:06,070 --> 00:06:08,140 David Marshall: Look, it's all of the above. But the first thing is that 108 00:06:08,380 --> 00:06:10,390 David Marshall: we don't want to get into a, you know, an 109 00:06:10,390 --> 00:06:12,850 David Marshall: arms race with the big banks. And we've got a 110 00:06:12,850 --> 00:06:15,760 David Marshall: wonderful field of membership. We are very lucky to have 111 00:06:15,760 --> 00:06:18,640 David Marshall: a number of points of presence on the military bases 112 00:06:18,640 --> 00:06:22,250 David Marshall: in Australia or branches and they are full service branches and 113 00:06:22,339 --> 00:06:26,740 David Marshall: they are a key part of our people, their technology enabled strategy. 114 00:06:26,740 --> 00:06:30,730 David Marshall: But we also have a market leading mobile app. Our app is 115 00:06:30,730 --> 00:06:33,640 David Marshall: rated higher than three of the four major banks. We 116 00:06:33,640 --> 00:06:37,479 David Marshall: have a great online service. You can do what you want, 117 00:06:37,480 --> 00:06:39,789 David Marshall: where you want, how you want with our organisation as 118 00:06:39,790 --> 00:06:42,610 David Marshall: a customer or member. So, you know, if you want, 119 00:06:42,610 --> 00:06:45,490 David Marshall: to open an account online. If you want to get 120 00:06:45,490 --> 00:06:48,279 David Marshall: a loan online, all of those sort of things are available. 121 00:06:48,400 --> 00:06:51,130 David Marshall: So it's all of those things. It's not one of them. 122 00:06:51,130 --> 00:06:54,130 David Marshall: And yes, we've got to be competitive on price. Absolutely. 123 00:06:54,130 --> 00:06:58,029 David Marshall: And we always are, you know, like every vibrant sort 124 00:06:58,029 --> 00:07:02,740 David Marshall: of progressive organisation, we're taking soundings on our competitive position 125 00:07:03,040 --> 00:07:06,659 David Marshall: virtually every day and we course correct where we need to. 126 00:07:07,360 --> 00:07:10,360 Sean Aylmer: It's a very tough industry you're working in because we've 127 00:07:10,360 --> 00:07:13,510 Sean Aylmer: talked about the big four in this conversation. But there's 128 00:07:13,510 --> 00:07:17,590 Sean Aylmer: all the neobanks. There's now all the payment system providers. 129 00:07:17,590 --> 00:07:20,140 Sean Aylmer: And I mean, Afterpay isn't a competitor, but if it 130 00:07:20,140 --> 00:07:22,730 Sean Aylmer: decides to get into banking as it's talking about having 131 00:07:22,730 --> 00:07:26,230 Sean Aylmer: done a deal with Westpac, suddenly does become a competitor. 132 00:07:26,530 --> 00:07:28,600 Sean Aylmer: The environment, it's a tough one. 133 00:07:29,080 --> 00:07:31,510 David Marshall: It is, but it's also full of opportunity. I mean, 134 00:07:31,560 --> 00:07:33,250 David Marshall: there is a lot of Australians that don't want a 135 00:07:33,250 --> 00:07:35,770 David Marshall: bank with a big bank. There's a lot of Australians 136 00:07:35,770 --> 00:07:38,640 David Marshall: that don't want to bank with a neobank or a startup either. 137 00:07:38,650 --> 00:07:41,710 David Marshall: And if you think about the origins of mutual banks 138 00:07:41,710 --> 00:07:44,830 David Marshall: or the old building societies and credit unions as they 139 00:07:44,830 --> 00:07:46,560 David Marshall: were the original disruptors. 140 00:07:46,570 --> 00:07:47,470 Sean Aylmer: Yeah, yeah. 141 00:07:47,770 --> 00:07:50,560 David Marshall: Up to one hundred and fifty years ago, these organisations 142 00:07:50,560 --> 00:07:54,010 David Marshall: were founded to largely fill a void left by the 143 00:07:54,010 --> 00:07:57,010 David Marshall: big banks who weren't providing the level of service and 144 00:07:57,010 --> 00:08:00,400 David Marshall: products to a lot of their customers. So disruption is 145 00:08:00,400 --> 00:08:02,860 David Marshall: not new to us. And I think it's the other 146 00:08:02,860 --> 00:08:06,820 David Marshall: thing is on many of the recent market changes, we've 147 00:08:06,820 --> 00:08:10,450 David Marshall: actually been not just Defence Bank, but the mutual banks 148 00:08:10,450 --> 00:08:12,580 David Marshall: have been ahead of the big banks, you know, things 149 00:08:12,580 --> 00:08:15,520 David Marshall: like real time payments and things. So I think that 150 00:08:15,750 --> 00:08:18,190 David Marshall: it's often we've got to make sure that we are 151 00:08:18,250 --> 00:08:22,780 David Marshall: articulating those virtues. And look, yes, we've got to be competitive. 152 00:08:22,780 --> 00:08:24,730 David Marshall: There's a lot of noise out there. But at the 153 00:08:24,730 --> 00:08:26,320 David Marshall: end of the day, what you've got to do is 154 00:08:26,800 --> 00:08:29,890 David Marshall: if you've got some points of difference in this environment, 155 00:08:29,890 --> 00:08:32,290 David Marshall: you've really got to leverage those and make sure that 156 00:08:32,679 --> 00:08:34,860 David Marshall: you bring the benefits of that to your customers or members. 157 00:08:35,800 --> 00:08:39,819 Sean Aylmer: So where do you see the system ending up? I 158 00:08:39,820 --> 00:08:42,550 Sean Aylmer: understand the big banks and I understand Defence Bank, too, 159 00:08:42,550 --> 00:08:45,250 Sean Aylmer: because it has a purpose which is very aligned to 160 00:08:45,250 --> 00:08:49,920 Sean Aylmer: its membership/customers. What about a lot of these new players? 161 00:08:49,929 --> 00:08:52,570 Sean Aylmer: Do you think it's just a period where we're going 162 00:08:52,570 --> 00:08:54,520 Sean Aylmer: to get lots of change in the industry, but it 163 00:08:54,520 --> 00:08:57,070 Sean Aylmer: will settle down at some point be it five or 10 years? 164 00:08:58,000 --> 00:09:00,880 David Marshall: History would show that there will be change, the extent 165 00:09:00,880 --> 00:09:03,670 David Marshall: to which that will be, you know, is it going 166 00:09:03,670 --> 00:09:06,010 David Marshall: to be radical? Is it going to be sort of 167 00:09:06,010 --> 00:09:09,099 David Marshall: less than radical? I mean, I'm no clairvoyant, but, you know, 168 00:09:09,160 --> 00:09:12,870 David Marshall: certainly the neobanks and the new entrants have created a 169 00:09:12,870 --> 00:09:16,450 David Marshall: little bit of disruption. Our challenge is to navigate our way 170 00:09:16,450 --> 00:09:18,670 David Marshall: through that and pick out the best parts of that 171 00:09:18,670 --> 00:09:22,270 David Marshall: and bring that to our members without following the crowd necessarily. 172 00:09:22,270 --> 00:09:25,180 David Marshall: I think often in strategy, it's what you don't do 173 00:09:25,179 --> 00:09:27,730 David Marshall: as opposed to what you do and focusing on very 174 00:09:27,730 --> 00:09:30,550 David Marshall: few but important things that you know that you can 175 00:09:30,910 --> 00:09:35,830 David Marshall: authentically deliver. I mean, my view is that customers of 176 00:09:35,830 --> 00:09:39,160 David Marshall: any organisation that's providing a service, not just banks, is 177 00:09:39,160 --> 00:09:42,130 David Marshall: that they want to be able to do things with 178 00:09:42,130 --> 00:09:45,250 David Marshall: minimum effort. They don't want to tell their story multiple 179 00:09:45,250 --> 00:09:47,469 David Marshall: times to different people. They don't want to fill a 180 00:09:47,470 --> 00:09:50,530 David Marshall: lot of paper. They just want a minimum amount of 181 00:09:50,530 --> 00:09:53,530 David Marshall: effort expended in their interaction with any service provider. And 182 00:09:53,530 --> 00:09:56,240 David Marshall: banks are no different. So one of our leading or 183 00:09:56,260 --> 00:09:59,469 David Marshall: north stars is reducing what we call member effort and what 184 00:09:59,470 --> 00:10:02,470 David Marshall: that is, is what's the effort that our members or 185 00:10:02,470 --> 00:10:06,100 David Marshall: customers have to expend when they're doing their banking with us? 186 00:10:06,100 --> 00:10:08,859 David Marshall: And we want to make that virtually nothing. And that's 187 00:10:08,860 --> 00:10:11,110 David Marshall: something that's a game that we think that we can win. 188 00:10:11,540 --> 00:10:13,390 Sean Aylmer: David, what's your background? I'm just interested. 189 00:10:13,780 --> 00:10:15,489 David Marshall: Yeah, well, you might pick by the accent I'm a Kiwi. 190 00:10:16,580 --> 00:10:16,830 Sean Aylmer: Yeah! 191 00:10:17,679 --> 00:10:20,170 David Marshall: Look, I grew up in New Zealand. I grew up 192 00:10:20,170 --> 00:10:23,020 David Marshall: on a farm back there. I happen to be a 193 00:10:23,020 --> 00:10:24,340 David Marshall: passionate All Black supporter. 194 00:10:25,240 --> 00:10:26,800 Sean Aylmer: Is there any other time in New Zealand? 195 00:10:27,020 --> 00:10:29,320 David Marshall: Yeah, yeah. We won't talk about the Bledisloe Cup, but 196 00:10:29,320 --> 00:10:31,870 David Marshall: I love AFL too, because I obviously reside in Melbourne 197 00:10:32,470 --> 00:10:34,540 David Marshall: and but look, I grew up on a farm in 198 00:10:34,540 --> 00:10:37,900 David Marshall: New Zealand. I actually went to my undergraduate was in 199 00:10:37,900 --> 00:10:41,410 David Marshall: Agriculture Commerce so I was probably going to head down that path 200 00:10:41,410 --> 00:10:43,569 David Marshall: in my early years and then sort of navigated my 201 00:10:43,570 --> 00:10:47,260 David Marshall: way into the big banks and had a very lengthy 202 00:10:47,260 --> 00:10:51,460 David Marshall: career there and then joined the mutual banking movement about 203 00:10:51,460 --> 00:10:54,520 David Marshall: six and a half years ago. And really loving it. I 204 00:10:54,520 --> 00:10:56,590 David Marshall: think it came at a time when there was a 205 00:10:56,590 --> 00:11:00,730 David Marshall: lot of growing discontent with the major banks and in 206 00:11:00,730 --> 00:11:03,429 David Marshall: the mutual banks, I think the results have been there 207 00:11:03,429 --> 00:11:07,510 David Marshall: to see that they've grown extremely strongly in the past 208 00:11:07,510 --> 00:11:09,610 David Marshall: few years. But, look, the challenges are always there. We're 209 00:11:09,610 --> 00:11:13,450 David Marshall: in a very competitive market. We're not sort of resting on 210 00:11:13,450 --> 00:11:17,229 David Marshall: the past. We're absolutely on our toes and making sure 211 00:11:17,230 --> 00:11:20,710 David Marshall: that we can compete and really focus on those things 212 00:11:20,710 --> 00:11:23,109 David Marshall: that we feel that we can do well and being 213 00:11:23,110 --> 00:11:27,370 David Marshall: quite clear about what we can't do and just providing that 214 00:11:27,370 --> 00:11:29,890 David Marshall: clarity to our people and, of course, our members. 215 00:11:30,340 --> 00:11:32,110 Sean Aylmer: David, thank you for talking to Fear and Greed. 216 00:11:32,540 --> 00:11:34,450 David Marshall: That's great. Great to talk to you and your listeners. 217 00:11:34,929 --> 00:11:38,260 Sean Aylmer: That was David Marshall, CEO of Defence Bank. This is 218 00:11:38,260 --> 00:11:40,510 Sean Aylmer: the Fear and Greed Daily Interview. Join me every morning 219 00:11:40,510 --> 00:11:42,580 Sean Aylmer: for the full Fear and Greed podcast with all the 220 00:11:42,580 --> 00:11:46,330 Sean Aylmer: business news you need to know. I'm Sean Aylmer. Enjoy your day.