Major banks are "bullies" who are abandoning rural communities and leaving vulnerable customers at risk of financial scams, a Senate inquiry has been told.
Nearly 800 bank branches have closed in regional and rural Australia since June 2017, according to data from the Australian Prudential Regulation Authority (APRA).
A long-running inquiry is examining the effect of closures on rural towns and considering possible mandates to keep a minimum number of country branches open.
When a bank shuts, customers are usually directed to a local post office for limited cash services through Bank@Post.
Australia Post has told the inquiry there are about 1150 rural communities with post offices, but no banks.
The LPO group, which represents post office licensees, is pushing for the establishment of a government-backed postal bank using Australia Post's vast regional network.
Co-chair Scott Etherington said three of the four major banks paid Australia Post for transactions, but post offices had to manage customers' banking inquiries at no charge.
"How much longer should our members continue subsidising the banks?" Mr Etherington told the inquiry in Canberra on Friday.
"These bankers are not clever businessmen. They're bullies."
Elderly rural customers relied on face-to-face banking at post offices, often in fear of being caught up in scams or losing money, Mr Etherington said.
"They can't afford for $5 or $10 or $1000, heaven forbid, to go astray because they hit the wrong button on their phone or hit the wrong thing on their web browser."
Banks point to the rapid uptake of digital banking and decline in cash transactions to justify widespread closures.
Australia Post chief executive Paul Graham said though Bank@Post was also likely to decline as customers moved online, cash was important for regional communities and would not disappear soon.
The national postal service paid $90,000 last year to fly cash into remote towns such as Coober Pedy in South Australia and Kalgoorlie in Western Australia, where the last banks have shut down.
"The closures they have made, they have done so because they don't see a future in having branch outlets; that's their view," Mr Graham said.
"We obviously do see a future in it."
A record $100 billion in cash was in circulation after the height of the COVID-19 pandemic, the Reserve Bank's note issue department deputy head Merylin Coombs said.
"People, at times of uncertainty, they do want cash as protecting against uncertainty," Ms Coombs said.
APRA data presented to the inquiry showed the number of banks in regional and rural areas reduced by 34 per cent in the past six years, along with 39 per cent in the cities.
The number of ATMs provided by banks dropped by 50 per cent in the country and 62 per cent in metropolitan areas.
The committee is due to hand down its final report next May.
