Banks must rebuild consumer trust and pursue cooperation

| August 17, 2018

Australia’s banking sector faces an uncertain future after the Royal Commission highlighted a long list of scandals and misdeeds, a crisis compounded by diminishing customer trust and enhanced competition from fast-moving players such as FinTechs and RegTechs, according to a new Banking Industry Report.

The TAS report found that traditional banking institutions are worried by growing customer distrust in the wake of the Royal Commission’s findings.  However they are also seeing more opportunity to advance with disruptive innovation and technology such as Artificial Intelligence (AI), Big Data and Automation to deliver better services and change negative attitudes toward the sector.

However, banks continue to struggle to fully realise the potential of technologies like AI to carve out a competitive edge ahead of international mega-companies gaining fast ground in the space locally.

The report, which canvasses industry leaders on their outlook and sentiment, further found that 1 in 2 banking leaders acknowledge greater customer engagement and experience as the front-running strategy for remaining relevant and competitive in the current environment.

Leaders acknowledged that being able to build more customer-centric culture and service capabilities to drive customer satisfaction and loyalty will be key over the next 12 months. However, leaders are grappling with truly understanding the changing customer landscape and are also finding it hard to adapt their operations and mobilise their teams to be better prepared for ongoing disruption (20 per cent).

For 1 in 3 leaders, market forces such as increasing competition and new market entrants are a concern, with leaders referring specifically to global competition as well as the number of disruptive players such as FinTechs, RegTechs and other start-ups making waves in the industry.

However, 58 per cent of leaders are not actively partnering with FinTechs or RegTechs – which demonstrates that there are opportunities ripe for the taking for those organisations who are wanting to carve out some market differentiation by partnering with these emerging businesses.

The report also found that leaders are keen to invest in three big areas over the next 12 months to gain market share and compete globally, including business transformation and technology (37 per cent), digital and data (33 per cent) and alliance partnerships (18 per cent).

Shane Baker, CEO, TAS says, “Australia’s banking industry is at a crucial point in its history, which is being driven heavily by disruptive technology and innovation, as well as getting some of the basics wrong like customer service and loyalty. Bankers are genuinely concerned about the long-lasting effect of the Royal Commission and how best to carve out competitive opportunities in the aftermath of these revelations, but also how to gain back customer trust.

“In the year ahead, the industry will go through a cycle of change that will showcase the strength and resilience of incumbents who are willing to adapt to change and collaborate with the right partners to enhance their resilience in the market, but we’ll also see the effects of open banking and how the newcomers like neobanks, FinTechs and international players will be taking a foothold in the sector like never before.”

The report canvassed the views of Australia’s banking and financial services leaders. It draws on in-depth interviews held between January and June 2018, with 50 leaders from a broad range of private and publicly listed companies.