Almost half of Australia’s corporate leaders believe keeping up with technological innovation is equally the biggest challenge their businesses will face by 2025, according to a new survey by BNP Paribas.
The report, titled 2025: The Future of Wholesale Banking – and what it means for Australia, paints innovation and the threat of digital disruption as the key battlefield in financial services over the next decade.
It comes as major organisations such as banks are boosting their IT spend in an effort to counter the rise of fintech startups which threaten to disrupt their traditional strongholds in lending, payments and wealth management.
However, technology-inspired innovation alone will count for little if it also doesn’t lead to strong customer engagement, according to David Braga, managing director of BNP Paribas Securities Services in Australia and New Zealand.
“Technology is not the ultimate disruptor. As we all know some of the technology used, such as mobile applications, has already been around for some time.
“However, it appears to be ultimately the engagement and relevance models that new providers offer that differentiates them from traditional financial institutions and generates traction for them. In this sense, it isn’t only the delivery of the idea, but its relevance and timing that causes disruption.”
New technology, new uses
The ability of financial organisations to effectively harness technology to deliver better customer service will be a key challenge, with the report highlighting a potential disconnect between the banks and their corporate customers. Corporates wanted more personalized solutions and better service but just over two-thirds (67 per cent) of financial organisations cited investment in technology as the most effective strategy to improve performance over the next decade.
The survey respondents also cited significant technology-driven opportunities in customer analytics and big data, as well as its ability to help deliver new products and services. Cost savings were also highlighted.
In its annual results in August, the Commonwealth Bank of Australia said it would increase its investment spend – despite the slowing economy – in an effort to maintain its customer satisfaction levels while also lowering its costs and boosting productivity.
“Even if we have this technology advantage, however you measure it, it can go in an instant,” CBA chief executive Ian Narev said during the analyst briefing. “The key aspect of this is the level of innovation, the drive for simplicity, has just got to keep going. We are often asked when is the investment in technology going to stop? It's not.”
At the same time, ANZ Banking Group announced that it had formed a special panel of international technology industry leaders which will advise the bank on emerging trends in the industry four times a year. Meanwhile, Westpac, National Australia Bank and AMP have all invested in innovation funds which are supporting a number of fintech start-ups.
The BNP survey predicts the banking market will eventually split into a high-touch personalized service and a tech-driven indirect self-service for the mass market. This new battlefield will increasingly count non-traditional entrants such as Apple Pay and UnionPay while super funds may also encroach on bank territory by offering credit cards and home loans.
The survey, which was conducted by Financial Review Business Intelligence and questioned 115 executives in April, also predicted:
- More bespoke financial solutions and reporting delivered using common online tools to deliver comprehensive views of finances, income, and payments.
- Fingerprint recognition on a range of payment methods to potentially be commonplace by the decade’s end.
- The rise of new electronic trading platforms, especially for private assets, by decade’s end.
- Better identification of the true cost and worth of delivering services to customers, allowing low-margin businesses to be automated.
- The potential rise of mobile technology, especially mobile phone data and money transfer services.
Read the full survey at cdn-pays.bnpparibas.com/wp-content/blogs.dir/71/files/2015/07/2025-Banking-in-a-Decade.pdf.
Source: BNP Paribas and Financial Review Business Intelligence as at April 2015
- “Technology will be used to deliver disruptive business models that replace the incumbents who are too complacent / lazy / set in their ways to adapt to change themselves.”
- “There will be more use of digital online solutions for raising equity and debt finance. A majority of our services will be delivered on-line.”
- “Expect IT-generated solution for the mass markets (ie robotic solutions).”
- “Most of the traditional banking activities will be done online and things will happen much quicker.”
- “There will be two markets – high touch personalised service and indirect self-service.”
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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