SMALL BUSINESS ENJOYS MAJOR BENEFITS FROM DEREGULATION OF FINANCIAL SERVICES SECTOR SAYS KPMG CONSULTING REPORT Sydney, 4 February, 2002: The Australian Bankers’ Association (ABA) has today released an independent report that shows small business is benefiting from the deregulation of the financial services sector.   To contribute to the public discussion on small business and banking, ABA commissioned KPMG Consulting to develop a comprehensive report  - “Small Business Banking in Australia.” Download in PDF or Word format.   The report identified small businesses are benefiting from: 57 institutions supplying 720 debt products often tailored for the sector; 44 institutions supplying 72 small business transaction accounts; electronic banking -  Internet use by small business has doubled since 1998 and up to 80% of them use it for some form of banking; the fall in interest rate margins has more than offset any increase in fees; the reduction in fees on loan products have offset increases in fees for deposit products; innovative product creation from individual banks and other financial service providers. David Bell, Chief Executive of the ABA, said: “The KPMG Consulting report makes it clear that banks are not only competing aggressively for market share, they are being challenged by a growing array of competitors.”   “Banks are creatively tailoring an increasing range of products and services for this sector. The report found the new products for small business are generally secured against residential property, and a number of banks have also made available loans to this sector against their expected cash flow, or using other assets as collateral such as plant, equipment and inventories,” Mr Bell said.   “Small business consumer rights have also been advanced through the Code of Banking Practice which has been expanded to include small business, not just consumers.”   Products and Choice   In this market segment, the KPMG Consulting report has identified many providers which supply tailored products to meet the needs of small business including: 57 institutions (30 bank and 27 non-bank) that offer 720 debt products; 44 institutions (17 bank and 27 non-bank) that offer 72 small business transaction accounts;  Martin Blake, Managing Director, KPMG Consulting, said: “Despite the increasing range of products, service providers and channels, small business still choose to retain their banking services with a bank and this sector is remarkably loyal.”   “Research shows that only around 16% changed their banking provider over a two-year period and of those which did switch 61% chose one of the major banks and almost 40% chose a non-bank provider, ” said Mr Blake. “Small business are taking advantage of the variety of financial service providers and are increasingly using multiple providers in a way that best services their needs.”   “In the past five years, regional banks have doubled their share of deposits to an estimated 12% and seen a 20% increase in their share of debt to 11%.”   “Significant innovation is occurring in the agribusiness sector with a number of banks and non-banks, often in joint ventures with other rural companies, offering a range of tailored banking and financial services to small business.”   Small business ahead on interest rate margins and fees The KPMG Consulting report says bank fees paid by small business have grown more slowly than those paid by large businesses, reflecting an overall fall in product prices for small business, including lower establishment fees on term loans and overdrafts, lower service fees on overdrafts and reduced interest rate margins. “Data analysed by KPMG Consulting from the Reserve Bank of Australia (RBA) shows the interest rate margins on small business loans have declined significantly and, at the same time, bank fees for small business loans have also declined, ” Mr Blake said. David Bell, CEO of the ABA, said: “The interest rate margin savings on a $100,000 overdraft written in 2000 compared to 1997 are $1,400. Combined with savings of $220 in bank fees on the same overdraft (2000 compared to 1997), the small business would be ahead $1,620.” “The overall conclusion, supported by RBA, is that the reductions in interest rate margins have significantly outweighed any increase in small business fees, ” Mr Bell said.  Mr Blake said: “Compared to overseas, the cost of transactions in Australia is generally low compared with six other OECD countries.” “Australia has the lowest charges for cash withdrawals and credits out of all these six countries. The only area where Australia’s charges are seemingly higher than the mean is for standing orders,” Mr Blake said.  Financing Small Business Mr Bell said in the year to September 2001, banks have lent $25 billion to small business which is around 38% of the total small business credit outstanding at $66 billion. “Banks are helping fuel the growth of Australian small businesses which make up 96% of all business in Australia and employ more than three million people – clearly an important sector for the economy’s welfare.”   Online – saves time   The KPMG Consulting report found the most popular online activity for Australian business is banking, up to 80% use the Internet for some form of banking and the number of small business accessing the Internet has more than doubled from 1998 to 2000.   “Demand is increasing from small business for Internet banking and banks continue to invest in these services, following the demands of this sector as well as personal customers.” Mr Bell said.  Visit www.bankers.asn.au or www.kpmgconsulting.com.au and download a copy of the full KPMG Consulting report – Small Business in Australia. ABOUT KPMG CONSULTING KPMG Consulting, Inc. (NASDAQ: KCIN), based in McLean, Virginia, is one of the world’s largest consulting and business systems integration firms with approximately US$2.9 billion in annual revenues.  Around the world, our approximately 10,000 employees provide business and technology strategy, systems design and architecture, applications implementation, network and systems integration, and related services. We help our clients capitalise on information technology to achieve their business objectives and build real-time enterprises.  Working with market leading hardware and software companies we serve more than 2,500 clients, including Global 2000 companies, small and medium-sized businesses, government agencies and other organisations. Our business and technology solutions are tailored to meet the specific needs of the industries we serve, and are delivered through global industry-focused lines of business, including communications and content companies, consumer and industrial markets, financial services industries, high technology companies, and federal, state and local governments.  For more information about KPMG Consulting, visit our Web site at www.kpmgconsulting.com For news media, visit http://kpmgconsulting.com/news/media_contacts.html. As of February 8, 2001, KPMG Consulting, Inc. is an independent consulting company, no longer affiliated with KPMG LLP, the tax and audit firm.  Please reference our company as KPMG Consulting, since KPMG is not an abbreviated name for our business and is an unaffiliated firm. # # # # # # # # # # # For further information contact: Heather Wellard ABA PR Phone: 02 8298 0411 Mobile: 0409 830 439 Pamela Kelly KPMG Consulting Phone: 03 9288 6397 Mobile: 0417 253 251 ENDS