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

 

Gareth Morgan: The Government’s Fresh Water Policy – Revisited

Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation... They found that the fresh water policy was a bit murkier than the Environment Minister let on. More>>

ALSO:

Interest Rates: RBNZ Hikes OCR To 3.5%, ‘Period Of Assessment’ Now Needed

Reserve Bank governor Graeme Wheeler raised the official cash rate as expected, while signalling a pause in rate hikes to assess the impact of moves so far this year. The kiwi dollar sank after Wheeler said its strength was “unjustified” and that the currency could have “a significant fall.” More>>

ALSO:

Fonterra: Canpac Site 'Resize' To Focus More On Paediatrics

Fonterra is looking at realigning its packing operations at Canpac, in the Waikato, to focus more on paediatric nutritionals... The proposed changes could mean around 110 roles may not be required at the site which currently employs 330. More>>

ALSO:

Scoop Business: Postie Plus Brand Gets 2nd Chance With Well-Funded Pepkor

The Postie Plus brand is getting a new lease of life after South Africa’s Pepkor bought the failed retailer’s assets out of administration and said it will use its purchasing power to reduce costs of stock and fatten margins. More>>

ALSO:

Warming: Warming Signs From State Of Climate Report

Climate data from air, land, sea and ice in 2013 'reflect trends of a warming planet' -- says the latest State of the Climate report, launched by U.S. and New Zealand scientists. More>>

ALSO:

Scoop Business: Embrace Falling Home Affordability, Says NZIER

Despair over the inability to afford a house is misplaced and should be embraced as an opportunity to invest in more wealth-creating activity, says the principal economist at the New Zealand Institute of Economic Research, Shamubeel Eaqub. More>>

Productivity Commission: NZ Regulation Not Keeping Pace

New Zealand regulators often have to work with out-of-date legislation, quality checks are under strain, and regulatory workers need better training and development. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news