As cost-of-living pressures, growing debt and a shifting credit landscape place mounting pressure on Australian consumers and businesses, the role of the Australian Financial Security Authority (AFSA) has never been more critical. Since its founding in 1999, AFSA has been responsible for overseeing personal insolvency and trustee services in Australia.
At the helm is Chief Executive Tim Beresford, who brings deep insight into the economic forces shaping financial distress and the evolving strategies needed to support those most affected. With decades of insolvency data at its fingertips, AFSA plays a key role in understanding national financial health and informing future resilience strategies.
Ahead of his keynote presentation at the 2025 Future of Banking Summit, we had the opportunity to sit down with Beresford to discuss the historical and current trends in personal insolvency, the lasting impact of the Hayne Royal Commission and the changing behaviours of creditors and consumers alike. He explores how technology and innovative lending models like Buy Now, Pay Later (BNPL) are reshaping the credit landscape, the ATO’s role as Australia’s largest creditor and what banks must do to support vulnerable customers. Beresford also reflects on the systemic risks and opportunities facing financial institutions as they navigate an era of accelerating change.
FST Media: Founded in 1999, the Australian Financial Security Authority (AFSA) is the agency responsible for personal insolvency and trustee services. What notable trends in insolvency and financial hardship have you observed over these years?
Beresford: If you look at insolvency trends over the last 50 years, they started off quite low in the 1970s and gradually increased, peaking at around 37,000 during the Global Financial Crisis between 2008 and 2010. After that, the numbers began to ease off, dropping to about 30,000 just before the Hayne Royal Commission.
The Hayne Royal Commission was an instrumental moment in the regulation of credit and changed the modus operandi for all creditors, not just banks.
The Royal Commissioner put creditors on notice that they had a responsibility to better understand their clients. As a result, you have seen a significant decline in insolvency post-Hayne. The speed and rate of that decline was amplified by Covid, with the significant outlays and moratoriums that were given to people – for instance, from JobSeeker and JobKeeper – so much so that from the Hayne Royal Commission in 2017, personal insolvencies dropped from about 30,000 a year down to about 10,000 in 2022.
Since the end of Covid, we’ve seen a gradual and modest rise in the rates of insolvency, so that by the end of this financial year we will have around 12,500 insolvencies.
FST Media: So, what’s driven these changes?
Beresford: A key factor is that the unemployment rate now has a four in front of it. Throughout the 1970s, the ’80s and even into the ’90s, unemployment often had a six, a seven, all the way up to a 10 or 11 in front of it. But with the unemployment rate so low, on relative terms, what you’re seeing is that people are meeting their financial obligations. That’s the first factor.
The second factor is that asset prices have increased. This allows people who do get in trouble to sell the asset and work their way out of the difficulty without needing to go into insolvency.
We’ve also seen a very big shift in credit and debtor behaviour. As I said, Hayne brought real change in creditor attitudes.
These days, creditors really do invest the time and energy into providing solutions – this might include interest rate holidays or some form of financial hardship process.
On the debtor side of the equation, during Covid, people rang their bank. Before Covid, typically this didn’t happen. Now, to manage unsustainable debts, people are actively engaging with their creditors and having constructive conversations.
So, while there’s a slight upswing in insolvencies now, we’ve seen a substantial reset over nearly two decades.
FST Media: AFSA has collected decades of data showing a strong correlation between business and personal insolvencies. In what ways has this relationship changed, and what are the implications for individuals and the broader financial landscape?
Beresford: It’s changed to some extent. If you look at ASIC’s numbers and actually examine corporate insolvencies as a share of registered companies, they are at the low end of normal compared with the early 2000s. In other words, corporate insolvencies are rising but so are the number of businesses.
AFSA looks after unincorporated small- to medium-sized businesses that are partnerships and sole traders. ASIC looks after small businesses which are incorporated. But the nature, the shape and the dimension of small businesses are very similar, regardless of whether they’re unincorporated or incorporated.
Small businesses are often driven off a person’s own personal balance sheet and cash flow. They may have corporate assets, but a lot of what drives small businesses is personal balance sheets. Through Covid there were moratoriums, but there were also significant outlays of funds through JobSeeker and JobKeeper, which really boosted personal balance sheets to help them manage through the rainy day.
One of the biggest positive cashflow impacts over Covid was that the tax office really slowed down its collection of collectable debt, specifically GST, PAYG income tax and superannuation. That collectable debt grew from around $26 billion to around $50 billion. Now, as the ATO has made clear, they are looking to collect that collectable debt. It is held on behalf of a small business and is due to the Government and, therefore, the Australian community.
What that is doing is putting additional pressure on people who may have really challenging and quite marginal business models. Suddenly, the $80,000 that may sit on the balance sheet is now being called in by the ATO to be collected.
FST Media: In the midst of growing economic uncertainty and rising cost of living pressures for consumers, what can financial institutions do to better support their customers?
Beresford: There are a lot of processes, tools and systems in place that weren’t there before. After Hayne, we’ve seen that change in creditor mindset and behaviour, which has not only washed across the big four banks but it’s gone across all creditor groups. Credit organisations are really trying hard to work with the debtor on how to arrange a payment plan.
All forms of financial services organisations have a whole range of financial hardship products and processes. As ASIC’s recent report highlighted, there are some areas and room for improvement; there’s always opportunity to enhance, sharpen, and improve performance in that space.
The best advice I always say to people is, have a conversation with your creditor. Have a conversation often and early when you’re starting to get into a little bit of difficulty. And then, obviously, if the difficulty is so significant, then reach out and get advice from someone you trust. In a small business case, that’s often a bookkeeper or an accountant, it can be a registered trustee, but get the advice to help you make good, informed choices.
FST Media: Technology continues to reshape the financial services landscape, with one notable trend since Covid being the rise of Buy Now, Pay Later (BNPL) platforms. What does this shift tell us about changing customer behaviours and the growing demand for alternative credit options?
Beresford: If I zoom out for a moment, what you’ve seen in personal credit is a phenomenal shift from unsecured credit. So, credit cards and personal loans were around about 15 per cent of GDP back in 2008; today, they represent around six per cent. What you’ve seen is a fundamental shift in our banking and credit system to providing secured products.
Often, people will use their redraw facility on their mortgage or they’ll have an offset account on their mortgage to buy that second car or motorbike. They’re often using secured credit rather than unsecured credit, which is a rational choice because it has a lower cost of interest. Equally, you’ve really seen the big players have a flight to quality. So, it’s actually quite hard to get a credit card if you’re below a certain income level. Young people often find it very difficult to get a credit card because the banks are lifting their requirements for getting one.
As a result, you’ve seen product innovation and a flight to quality, with some banks being very mindful about who they allow to have unsecured credit, which has allowed other players to come into the market.
You’ve seen organisations like Latitude Financial play more into this unsecured market. You’ve also seen new players like Money 3 and BNPLs like Zip Pay come into the market and offer these products. There’s a risk/reward trade-off here.
What we’ve ultimately seen is a shift in business and product mix. So, tier one players are being far more prudent around what unsecured lending they offer. Where there are tier two and tier three players, they have taken some of that share that used to go to the major banks, and that’s where you’ve seen new products come into the market, including those offered by the BNPLs.
From an insolvency perspective, we are not seeing large value – often BNPLs have loans at $100, $200, $400. However, we are seeing a large number of them.
FST Media: You’ll be speaking at the upcoming Future of Banking Summit. What insights are looking to share or take away from your peers in the banking and fintech space? Are there any particular concerns that you will be looking to address?
Beresford: Right now, you’re always looking at the question of stability. Trust and stability are fundamental in financial services, and the uncertainty we’re seeing in our geopolitical environment right now is something that the industry needs to reflect on. After all, we are in a more uncertain and ambiguous geopolitical context, which raises the level of risk attached to financial stability.
The second thing is, there is substantial technological innovation with respect to business mix and product mix. While there is opportunity here, there are also real risks associated with such technologies. Back in the old days when there was a run on a bank, we had enough time to get to the branch and get our money out. However, looking at the recent Silicon Valley Bank collapse, it happened within hours. Again, there’s terrific opportunity, but when something does go awry, it happens at pace.
Technological innovation needs to be considered with the opportunity and the risk lenses because disruption is intrinsic to innovation.
The final thing is, in the context of climate, I’d like to get more of a sense of how this is playing forward and what it means for the financial services sector. The interconnectedness of the system – something we’ll discuss in our presentation – is more of a feature than ever before.
As such, we need to anticipate and, with a curious mindset, consider the implications of technology and innovation for the system and how it plays into the customer experience and, ultimately, your social licence to operate. ■
