Report highlights banking trends
SIX powerful forces are shaping banking in Australia today, a new PwC report says.
The Future of Banking through a Kiwi Lens looks at the performance of Australia’s big banks and raises questions about the six trends forcing them to consider how they operate today in preparation for tomorrow.
PwC partner and banking and capital markets leader Sam Shuttleworth said getting ahead of the trends and looking at them from a Kiwi perspective was important for New Zealand’s banking sector.
Almost all of New Zealand’s banks were Australianowned and faced the same issues — most of them global challenges which could not be ignored.
‘‘When we look at the report, we see six big trends affecting the financial sector. All of these can be looked at through a New Zealand lens. They have to be if our banks are to stay relevant, profitable and evolve to suit the environment.’’
The report said banks must become simpler, smaller and more deeply connected to customers so they could become more agile in a changing world.
A bank’s ability to quickly adapt to suit customer preferences was going to be a key focus in coming years.
Banks were increasingly having to adapt their service offerings as the customer demographic morphed from the wealthiest generation in history to the most indebted, Mr Shuttleworth said.
In New Zealand, half of the population had some debt. Those aged between 24 and 35 were the most indebted age group, raising the question of how banks ser viced less wealthy demographics and whether their appetite for risk was changing as a result.
That also posed some big questions for chief executives in the sector.
Were 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 would seek to be more responsive to shifting demographics, he said.
Apart from changing demographics, banks also had to deal with changing technology. Information systems were becoming more open, modular and capable. For banks, that increased both the scale and speed with which they could use data, analytics and communications to make targeted propositions to microsegments or individuals.
Changing consumer behaviour meant consumers were better educated, more lawabiding, tolerant, confident and trusting — as well as better informed, aware and ready to reassess and retract trust, Mr Shuttleworth said.
‘‘As they do more of their business online, communicating with friends and peers over multiple social media channels, they are increasingly confident in being able to identify the best offer, at the best price, from anywhere around the world.’’
Asia was becoming more relevant to Australia, not only economically but also socially and culturally. The Australian domestic economy was linked to the fortunes of Asian economies, not just in terms of exports but also foreign direct investment, business partnerships, domestic services and residential real estate.
Familiarity with Asian languages, currencies, culture, norms and national idiosyncrasies was no longer imperative just for trade finance teams in specific suburbs, but was increasingly a professional requirement for an Australian banker.
Governments, along with their regulators and central banks, were reasserting authority over the macro economy in general and the banking industry in particular. For banks, government relationship management was moving from the domain of corporate affairs to the top of the agenda.
The next three to five years would be characterised by slowing productivity growth, environmental constraints, debt, deleveraging, financial repression and an ongoing sense of uncertainty.
As events around the world demonstrated, economic uncertainty fed into and was further amplified by political uncertainty, exacerbating the risk, Mr Shuttleworth said.
‘‘What growth we do see is increasingly driven by small and micro businesses, especially in the service and freelance economy which banks, traditionally oriented to assetbacked lending, struggle to properly serve.’’