Financial anxiety is a major cause of stress for Australians but lenders can help by making banking simpler and more convenient.

 
It may sound simple but delivering on that promise is no simple task. ME Bank chief information officer Mark Gay says the bank, which was first launched by a group of industry super funds in 1994, has learned that innovation is the key.
 
“Banking products and services that help address anxiety is one of ME Bank’s main aims,” Gay says.
 
“Successful financial products and services follow some basic principles. They help customers get ahead by saving, buying assets and building wealth, and living their lives; and by making banking easier and more convenient in a complex world characterised by financial anxiety.”
 
“New technology is enabling banks to find new ways to help customers and, given banking is highly regulated and homogenous, this has become a key source of differentiation between banks.”
 
Australians rated financial issues as their top cause of stress over the five years to 2015, according to a survey by the Australian Psychological Society. Buying a home – often the largest investment we ever make – is particularly stressful and the current housing affordability is making things worse.
 
More than 40 per cent of 1000 non-homeowners recently polled by psychologist Elizabeth Neal (in conjunction with ME Bank) said they could not imagine feeling fulfilled without owning a home.
 
It’s something that ME Bank is hoping to change with a fully online home loans process that will take borrowers from application to settlement online.
 
“While some customers will always prefer to meet a banker face-to-face, a growing number are savvy enough with technology and home loans to prefer this channel,” according to Gay.
 
“Regulatory requirements mean the home loan application and settlement process is complex so there are challenges in putting the process entirely online. Banks that build this service will have an advantage.”

 

Industry innovation accelerating despite regulatory challenges

It is an ambitious project for a small bank. In January, it signed a five-year deal with tech consultancy firm Capgemini to manage some of the ‘commoditised’ components of its core banking infrastructure to allow it to place more focus on digital products and services.

“ME is a young bank so while we’re leading in some areas, we’re also catching up in others,” Gay says. “So, it’s a balance between building a range of products and services that customers expect, balanced with new concepts to delight and differentiate ourselves.”
 
ME Bank has $20.36 billion in total resident assets compared to the big four banks’ average of $704 billion according to APRA data.
 
ME Bank has effectively set up its own innovation hub in the form of a new ‘customer experience’ department. It is an industry wide trend and the major banks are putting major resources into innovation departments as they launch an array of new products.
 
ME Bank says it now filters marketing, product design, digital sales and customer insights through the customer experience and embeds innovation across the entire product design, development and promotion process.
 
However, the nature of innovation means not every project will end up working as intended.
 
“A few years ago, ME trialled new technology to build an online application process for our deposit and lending products; however, after an initial pilot we realised it wouldn’t provide the operational efficiencies we needed long-term.”
 
“We quickly made the decision to change technologies, resulting in a relationship with Pega and today Pega’s business process management software has become a core tool for improving customer experiences and efficiency.”
 
US-based Pegasystems is a dominant software provider in the fields of customer relationship management and business process management, counting eight of the top 10 global banks as customers in 2015.
 
The rate of innovation across the industry is still accelerating. Fintech investment in Australia skyrocketed from $US185 million in 2015 to $US656 million in 2016 as institutional investors and major incumbents poured money into the sector. However, many of the innovations to date have been incremental according to Gay.
 
“Regulation in banking will always put a speed limit on the amount and pace of disruption within the industry. As such most of the innovations to date have been at the edges, for example peer-to-peer lending. Over time we’ll see more and more disruption and ME hopes to be one of those players changing expectations of what a bank can be.”
 
Disruption and innovation are often two sides of the same coin. But, given close to a third of Australians find dealing with money stressful according to ASIC’s Financial Attitudes and Behaviour Tracker survey, it is ultimately a sure path to improve customers’ lives.
This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY.
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