Serious challenges confront commercial banks

Sam Shuttleworth – Sam-Shuttleworth

‘The Future of Banking through a Kiwi Lens’ (A PricewaterhouseCoopers Strategy and Future of Banking in Australia) looks at the performance of Australia’s big banks and raises questions about the six trends that are forcing them to consider how they operate today, in preparation for tomorrow.

Almost all New Zealand’s banks are Australian-owned and therefore face the same issues – most of these are global challenges that cannot be ignored.

The report looks at changes in demographics, technology and consumer behaviour; Asiafication; the impact of an interventionist Government; and a subdued macro economy.

Getting ahead of these trends and looking at them from a Kiwi perspective is important for our own banking sector.

When we look at the report, we see six big trends affecting the financial sector.

All these can be looked at through a New Zealand lens – they must be, if our banks are to stay relevant, profitable and evolve to suit the environment.

Connecting with customers

Banks must become simpler, smaller and more deeply connected to customers so that they can become more agile in an ever-changing world.

A bank’s ability to quickly adapt to suit customer preferences is going to be a key focus over the next few years.

Banks are increasingly having to adapt their service offerings as the customer demographic morphs from the wealthiest generation in history to the most indebted.

In New Zealand, half of our population have some form of debt, with 24-to-35year-olds the most indebted age group, which brings up questions about how our banks service different, less-wealthy demographics and whether, as a result, their appetite for risk is changing.

Major posers

This also poses some big questions for CEOs in the sector: Are New Zealand banks ready for a wider change to their banking models because of a change in their customers’ circumstances?

From an ageing population to one with different levels of wealth, banks will seek to be more responsive to our shifting demographics.

As we approach 2020, the Report outlines six priorities for banks and some proposals for how they can respond.

They must organise themselves around the customer, simplify the organisation, make the most of their partnerships, focus on specific areas of innovation, embrace regulation and put their culture to work.

Sam Shuttleworth is Partner and Banking & Capital Markets Leader at PricewaterhouseCoopers based in Auckland. The above article is only a curtain- raiser. For full text of the Report, please visit www.pwc.co.nz

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