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

 

Cosmetics & Pollution: Proposal To Ban Microbeads

Cosmetic products containing microbeads will be banned under a proposal announced by the Minister for the Environment today. Marine scientists have been advocating for a ban on the microplastics, which have been found to quickly enter waterways and harm marine life. More>>

ALSO:

NIWA: 2016 New Zealand’s Warmest Year On Record

Annual temperatures were above average (0.51°C to 1.20°C above the annual average) throughout the country, with very few locations observing near average temperatures (within 0.5°C of the annual average) or lower. The year 2016 was the warmest on record for New Zealand, based on NIWA’s seven-station series which begins in 1909. More>>

ALSO:

Farewell 2016: NZ Economy Flies Through 2016's Political Curveballs

Dec. 23 (BusinessDesk) - New Zealand's economy batted away some curly political curveballs of 2016 to end the year on a high note, with its twin planks of a booming construction sector and rampant tourism soon to be joined by a resurgent dairy industry. More>>

ALSO:


NZ Economy: More Growth Than Expected In 3rd Qtr

Dec. 22 (BusinessDesk) - New Zealand's economy grew at a faster pace than expected in the September quarter as a booming construction sector continued to underpin activity, spilling over into related building services, and was bolstered by tourism and transport ... More>>

  • NZ Govt - Solid growth for NZ despite fragile world economy
  • NZ Council of Trade Unions - Government needs to ensure economy raises living standards
  • KiwiRail Goes Deisel: Cans electric trains on partially electrified North Island trunkline

    Dec. 21 (BusinessDesk) – KiwiRail, the state-owned rail and freight operator, said a small fleet of electric trains on New Zealand’s North Island would be phased out over the next two years and replaced with diesel locomotives. More>>

  • KiwiRail - KiwiRail announces fleet decision on North Island line
  • Greens - Ditching electric trains massive step backwards
  • Labour - Bill English turns ‘Think Big’ into ‘Think Backwards’
  • First Union - Train drivers condemn KiwiRail’s return to “dirty diesel”
  • NZ First - KiwiRail Going Backwards for Xmas
  • NIWA: The Year's Top Science Findings

    Since 1972 NIWA has operated a Clean Air Monitoring Station at Baring Head, near Wellington... In June, Baring Head’s carbon dioxide readings officially passed 400 parts per million (ppm), a level last reached more than three million years ago. More>>

    ALSO:

    Get More From Scoop

     
     
     
     
     
     
     
     
    Business
    Search Scoop  
     
     
    Powered by Vodafone
    NZ independent news