Recommendations made as a result of the royal commission could see changes to banking sector, with the big banks set to make a resurgence despite concerns over financial misconduct, transparency, and penalties for fees with no services.
Financial experts explained how consumers are now more aware of what banks can be capable of, how this will affect young people, and what can be done to stay on top of your savings.
“It was necessary so that we can now start to rebuild trust in the sector and thats the most important thing,” said Julia Schortinghuis of Lighthouse Capital.
Financial experts believe loans will now be harder to access, along with most consumers tightening up on their every day expenditure.
Ms Schortinghuis said the banks are digging a lot deeper than what they used to, affecting anyone trying to get a loan at the moment. Factors like how often you’re using Uber Eats, what mobile phone plan are you on, do you have Netflix, etc. are all contributing to the bank’s decisions to approve a loan.
When asked if young people are renowned for having short pockets and long arms, Ms Schortinghuis commented on the dangers of the Afterpay craze that is occurring.
“Too often we see the buy now pay later scenario, but when the time comes to pay it off there’s often high fees or higher interest rates that people aren’t expecting,”
“I think that people need to get back to more of sense of save first, and then buy,” she said.
Financial planner and senior lecturer at Curtin University, Elson Goh, said getting into the market depends on what kinds of prices you’re looking at and where in the property cycle you are.
“Lending policies are usually centred around can you afford the loan, can you afford the repayments, and how much you are borrowing,” explained Mr Goh.
Big banks will also have the upper hand over smaller institutions, as brokers are not being involved meaning less fees and less competition. Lack of market diversity will prove difficult to young people looking to get credit.
“Competition is very important because this is where it’s good for consumers to see fees pushed down as low as possible,” said Mr Goh.
He explained one of the concerns of the big banks is they are quite homogeneous in terms of what they offer. If you do not fit the mould, you are stuck. But that’s where small banks and lenders come in and are able to offer different services and products to suit different niches that the big banks can’t offer.
Mr Goh also said smaller financial institutions rely on brokers to distribute their products, so without these brokers the big banks win because it eliminates the competition from smaller lenders.
“It’s important so consumers aren’t just constrained to the 4 major banks, so the more competition that there is the more pressure there is on the banks to offer better deals,” agreed Ms Schortinghuis.
More onus needs to be placed on young people, making them aware of what role their financial decisions will play in the future.