How intensive digitisation is changing the face of Australia’s financial services sector | HCLTech

How intensive digitisation is changing the face of Australia’s financial services sector

How intensive digitisation is changing the face of Australia’s financial services sector
March 20, 2019

Whither Australia’s financial services providers heading in 2019? In many cases, keeping their heads down after 2018 degenerated into an annus horribilis for the sector.

The high-profile Hayne Royal Commission witnessed dubious processes and practices exposed to public view. The upshot of these revelations resulted in a collective realization that a significant change was essential and long overdue.

On the operational front, circumstances have been equally interesting. In addition to enhanced regulatory scrutiny and the knock-on effect of a cooling housing market, Australia’s institutions are grappling with a business landscape that’s been altered immeasurably by , in a short space of time. As a result, existing players in the financial industry face three key challenges:

Customers calling the shots

The days of customers choosing a bank for life are deader than the dodo. Today, businesses and individuals are comfortable dealing with multiple service providers and switching between them to get the best deal.

The rise of smartphones has resulted in a corresponding drop in face-to-face interactions and created an expectation that on-demand services will be 24/7 via the channel of the consumer’s choice.

These changes in customer behaviour have been the catalyst for a wave of transformation initiatives which harness a gamut of new technologies, including , , and big data.

For example, in 2017, the National Australia Bank (NAB) announced plans to invest $4.5 billion over three years on re-engineering its core systems and processes. At the same time, the Australia and New Zealand Banking Group Limited (ANZ) embarked on a massive agile transformation initiative to respond more quickly to customers’ changing demands and expectations.

The bottom line is this: that want to stay in business have been forced to accept that the days of doing business on their own terms are done. Continual investment in ICT and systems to enable them to keep the customer satisfied is the new normal and that’s unlikely to change any time soon.

Facing off threats from non-traditional competitors

In the old days, the Australian financial services sector operated in a relatively simple manner – big four banks gobbled up the lion’s share of the business and a slew of second-tier institutions shared the remainder. The Fourth Industrial Revolution (4IR) has made things considerably more complicated.

Here in Australia, we’ve seen the emergence of a new breed of agile disruptors; like the share market sensation Afterpay and neo-lender Wisr are carving off lucrative slices of what was once safe business for the majors.

Internationally, non-financial institutions such as Amazon and Facebook are looking for ways to leverage their customer bases, which comprise billions, to expand and diversify.

Some of the new players in the financial industry are not subject to the same rules and regulations as traditional financial institutions, making it tougher for the latter to compete. Afterpay, for example, is not governed by Australia’s National Credit Code by virtue of the fact it’s considered a payment provider rather than a lender or credit provider.

Meeting the compliance challenge

Australian financial service providers faced a chorus of calls for increased regulation in the wake of last year’s royal commission into the sector and there’s every reason to think that’s what they’ll get. Commentators expect the introduction of a range of new measures, including expanded enforcement powers for industry regulators APRA and ASIC and greater penalties for institutions that wrong their customers.

Ensuring compliance with enacted regulations is neither free nor cheap. It’s likely that we’ll see institutions investing heavily in systems and processes that enable them to demonstrate that they have, though belatedly, got their respective houses in order.

Harnessing technology to drive innovation

It’s going to be a case of ‘those who harness digital technologies the best win’ as Australian financial service providers race to find and maintain their places in today’s uncharted and rapidly evolving digital finance landscape.

Emerging technologies, such as blockchain, artificial intelligence, and machine learning, which enable machines to simulate and augment human intelligence, will be integral to their strategies.

These will be used increasingly to perform repetitive manual tasks, provide decision makers with fresher and more detailed data on which to base their calls, delivern the personalized products and services that today’s consumers demand while enhancing security, traceability, and transparency of transactions. The latter has evolved to become an ever-more-vital imperative, following the growth of the global marketplace and the rise of instant and virtual payments.

Read about the three key challenges faced by the Australia’s Financial Services Sector due to intensive digitization.

Security risks have never been greater but and AI driven tools and technologies promise to become the foundation of a secure, agile and intelligent environment in which institutions and customers can place their trust. These technologies have a way to go and so does the disruption that’s sweeping the financial services sector.

It’s an exciting and unsettling time for the digital finance market, given standing still is not an option and the rewards promise to be significant for those that get it right.

Get HCLTech Insights and Updates delivered to your inbox