AU Royal Commission report — another blow to traditional banks?
GOVERNMENT entities in Australia are working hard to make sure that local businesses are able to compete in the digital age — providing them with the guidance, support, and funding they need to buy and use technology.
However, based on feedback from local organizations, it seems as though the latest recommendations in the Royal Commission report on the banking, superannuation, and financial services industry by former Justice of the High Court Kenneth Hayne will cause some hiccups.
Experts and local media lauded the fact that Hayne is working hard to make sure that the customers’ voice is heard and that there’s more transparency in the financial system in the country.
However, they’re also mindful that several of his recommendations require banks and financial services organizations to channel a larger proportion of their budget into new compliance tools and platforms.
“There are increasing signs the sizable compliance technology investments now being prioritized could come at the short to medium term expense of more productive and profit-generating investments to appease increasingly forceful regulators, with vendors already being hit in the cross fire,” said one local publisher.
To make things more clear, the report hasn’t explicitly asked banks to stop investing in creating innovative products and solutions that leverage cloud, big data, artificial intelligence, or any other new-age technologies.
However, resources are finite and sudden investments into “better” compliance tools will naturally force banks to halt other (digital) projects (that might deliver more revenues in the short run).
Much ado about nothing?
Banks aren’t exactly complaining about the new report or its implications. They’re happy to align their efforts with the Hayne’s recommendations and the government’s vision.
To optimistic leaders, this is an opportunity for banks to double-down on data privacy and security solutions, and invest in integrated solutions for seamless reporting and compliance.
However, far-sighted experts see this as another blow to the competitiveness of traditional banks in the country — and a major opportunity for fintech companies to earn a bigger chunk of the overall market.
The opportunity is actually much bigger for 100 percent digital banks, also known as neobanks — a segment of the fintech market that is growing stronger and bigger every day.
Be it Revolut, Xinja, or Up, Australians are becoming fans of such offerings because of the simplicity and transparency they offer.
Further, with many of them applying for licenses to operate as “unrestricted authorized deposit-taking institutions”, they’re going from strength to strength in a market that is growing increasingly frustrated with traditional banks that are behind the curve on technology adoption, charge high fees, and offer investment options riddled with jargon.
At the end of the day, it seems as though the recommendations of the Royal Commission report on the banking, superannuation, and financial services industry will cause some trouble for banks that want to stay competitive.
Those that want to succeed must be willing to dig deeper into their pockets to keep climbing the digital maturity curve to improve customer experience and deliver on customer expectations.