Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


‘Traditional’ banks may not exist by 2025

‘Traditional’ banks may not exist by 2025

A new report from PwC suggests that by as soon as 2025 to 2030, New Zealand could exist without banks of the traditional kind. The report, The Future Shape of Banking, says that as barriers to entry for non-banks to provide formerly ‘core’ banking services continues to decline, the business models of today’s banks will be challenged.

PwC’s Financial Services Leader Bruce Baillie says, “New Zealand’s banks remain profitable, but the industry needs to consider how long this strong performance can continue with technology, customers and regulation changing everything.

“With non-banks beginning to snap at the services offered by traditional providers, such as equity crowd funding and peer-to-peer lending, the banks’ priority must be staying on top of this changing financial market.

“The banking industry of the future will look very different from today. New Zealand’s banks must play to their strengths and push ahead with transforming for the future or risk losing their incumbent advantage.”

Yet, the report points to ‘traditional’ banks’ substantial advantages in helping prevent their positions being challenged: banks’ brands and reputations remain powerful, shored up by familiarity, experience and regulation.

“Trust matters in financial transactions and some of the resistance to alternative banking providers results from a lack of trust in their security. Brands and reputation will become central to banks’ value,” says Mr Baillie.

The big changer noted on the horizon is the speed of technology change, which can alter the cost structure of whole industries, to the point where what was once a barrier to new entrants becomes a handicap for incumbents.

“Traditionally the cost of banks’ technology infrastructure and bespoke systems acted as a defence to new market entrants. Yet, with the rise of mobile banking and online platforms and people’s willingness to do their banking online, banks’ legacy infrastructure and systems could soon be a hindrance. Technology is also making it easier for customers to switch between banks and other service providers.”

“Banks must commit to radical change, invest heavily in customer service and operational innovation and stay ahead of the curve in terms of technology, changing customer expectations, culture and regulatory change. But this need to transform comes at a time when the task of dealing with legacy issues and regulation is consuming huge amounts of resources, such as New Zealand’s new anti-money laundering regime and restrictions on high loan-to-value mortgages,” advises Mr Baillie.

Ironically, the report suggests New Zealand’s banking industry could be vulnerable to challenges from Europe’s banking industry because it suffered more severely during the global financial crisis.

“Europe’s banks faced close scrutiny, and a raft of regulatory reform well beyond what we’ve seen in Australasia following the financial crisis, with some institutions brought to their knees. Those that survived have emerged stronger, more innovative and agile than their counterparts around the world. Ongoing stress tests and a far more challenging market than New Zealand positions Europe’s banks well and poses a threat to New Zealand’s industry.

Mr Baillie notes New Zealand’s approach to regulation will also need to change with the industry: “Banking regulators focus on a smaller number of ‘too big to fail’ institutions that dominate the financial market. In the future banking services will be more dispersed and the challenge for regulators will be to increase their remit to include areas that currently fall outside it or are only touched on at the moment. Also, who is to pay for and bear the cost of regulation, which will include monitoring many more providers? Currently it is the big financial institutions,” concludes Mr Baillie.


- ends -

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Crown Accounts: Government Ekes Out Six-Month Surplus Of $9M

The New Zealand government eked out a tiny surplus in the first six months of the fiscal year as growth in domestic consumption lifted the goods and services tax take, while uncertainties over the Kaikoura earthquake costs meant expenses were less than expected. More>>

ALSO:

Almost 400 Jobs: Shock At Cadbury's Dunedin Factory Closure

Workers at Cadbury in Dunedin are reeling after learning this morning that the iconic Cadbury factory is to close, with the loss of almost 400 jobs... “The company had reported it was doing well and this has come out of the blue,” says Chas. More>>

ALSO:

Transport: Boards Of Inquiry For Auckland Roading Projects

Boards of Inquiry have been appointed to decide on two significant Auckland roading projects in a move which will get a decision by the end of the year, Environment Minister Dr Nick Smith and Conservation Minister Maggie Barry announced today. More>>

ALSO:

Three Months On: Quake Reciovery In Kaikōura And Elsewhere

Three months after the magnitude 7.8 earthquake on 14 November, encouraging recovery progress is being made in affected communities. More>>

ALSO:

Jetstar, Qantas For Govt Transport: Government Still In Talks With Air NZ

The government is still negotiating with national carrier Air New Zealand in a cross-agency air travel contract that will add a number of new airlines to the list of approved flyers. More>>

ALSO:

Get More From Scoop

 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news