‘Generation Debt’ offers challenges
New Zealand banks have to come to terms with how they will offer their services to the most indebted generation in history, an industry expert says.
PwC has released its latest report on the future of the banking sector, in Australia and New Zealand.
PwC’s banking and capital markets leader in New Zealand, Sam Shuttleworth, said banks would have work to do if they wanted to stay relevant and profitable.
He said a bank’s ability to quickly adapt to suit customer preferences would be a key focus for the next few years.
‘‘Banks are increasingly having to adapt their service offerings as the customer demographic morphs from the wealthiest generation in history to the most indebted,’’ he said.
‘‘In New Zealand, half of our population have some form of debt, with 24- to 35-year-olds the most indebted age group, which brings up questions about how our banks service different, less-wealthy demographics and whether their appetite for risk is changing as a result.
‘‘This also poses some big questions for CEOs in the sector: Are New Zealand banks ready for a wider change to their banking models because of a change in their customers’ circumstances?
‘‘From an ageing population to one with different levels of wealth, banks will seek to be more responsive to our shifting demographics.’’
He said higher levels of debt were not necessarily bad for financial stability.
Although mortgage debt had doubled in a decade, it was unlikely to do so again over the next 10 years.
‘‘But the products and services that segment of customers need is everevolving in the digital age. Banks need to ensure their product suite is hitting those requirements.’’
Customers might want more information available to them to understand their position and the way they interacted with their banks. They might also want more interaction through digital channels.
But Shuttleworth said that did not necessarily mean the demise of physical branches.
‘‘There are reports offshore of certain banks that still have branches but they no longer dispense cash because that’s the role of the ATMs.
‘‘But customer satisfaction has increased because when they do go to a branch to deal with financial questions they do not get held up in a queue behind someone who is wanting to withdraw cash face-to-face.
‘‘There is a place for the branch but from a transactional point of view, so much more now is done through digital channels. It’s about making sure banks’ structure remains relevant to those needs and demands.’’
Shuttleworth said banks of the future might offer more simplification, and more focus on a niche, target group of customers.
The PwC report pointed to mortgages as an area that could be streamlined. It said a customer visiting a home lending page from a big bank would be confronted with a range of products, with ambiguous names and descriptions and inconsistent prices.
The bank and customers would benefit if there was just a ‘‘home loan’’ product that was then customised online to a customer’s requirements.
There would be fewer marketing messages and products would be easier to understand and compare.
It cited a recent review of bank marketing which found a discount offer that was, due to special deals on some other products, the most expensive on the page.