Financial institutions operate in a constantly evolving industry with new and amended regulations continually being released. The impact increases costs, which can stifle innovation and action.

In an environment where interest rates are increasing and economic uncertainty looms, organisations will question their borrowing for capital expenditure, impacting bank lending. There will be further regulatory reforms, an increased focus on managing cyber risk and changes to capital frameworks.

It’s a time of accelerated change, with evolving expectations from all stakeholders, including consumers, businesses, investors, shareholders and regulators. New and sustainable ways of doing business alongside rapidly advancing digital innovation and more agile competitors are transforming the financial services market.

It’s time to explore new opportunities, as well as reimagine capabilities, operating and business models. By working with us, we’ll ensure you’re set up to get ahead of the change.

Top trends in Financial Services

  • Risk and regulation
  • Innovation
  • Performance and transparency
  • Risk and regulation
    Risk and regulation
    With APRA and ASIC rolling out significant and concurrent regulatory reform, governance, compliance, performance and conduct are all under the spotlight.
  • Innovation
    Innovation is at the centre of Financial Services – across AI, open banking, Fintechs and more – driven by regulatory changes, shifting consumer preferences and technology transformation.
  • Performance and transparency
    Performance and transparency
    Businesses need to stay on top of change across their prudential requirements, including measures put in place by ASIC and APRA, transitioning from BEAR to FAR, and considering the adoption of ESG reporting.

Issues impacting businesses in Financial Services

Transparency and compliance high on the agenda

The Australian Prudential Regulation Authority (APRA) has been rolling out significant and concurrent regulatory reform across the financial services sector. Regulated entities will need to continue navigating these reforms, including the implementation of the Financial Accountability Regime (FAR), the growing spectre of cyber risk and information security, and enhanced prudential requirements around operational resilience and risk management. FAR is expected to optimise risk management and governance across banking, insurance and superannuation. Alongside this, new enforceable requirements have been put in place by the Australian Securities & Investments Commission (ASIC) around financial reporting and transparency. Preparing early to ensure compliance is key to satisfying the changing regulatory requirements going forward.

Technology and innovation at your fingertips

Driven by regulatory changes, shifting consumer preferences and the fast pace of technology transformation, innovation is at the centre of financial services. This has allowed organisations to become more competitive, better manage their data and make more informed decisions. Ranging from artificial intelligence synthesising information to drive personalisation and streamline operations, to open banking, enabling financial institutions to better manage risk and create tailored products – there’s a raft of innovation at your fingertips.
However, recent data breaches bring into focus the importance of cyber security and operational resilience, as well as having a strong strategy in place to prevent, minimise and rectify impacts. You’ll need to stay on top of requirements including APRA’s Prudential Standards CPS 234: Information Security and Prudential Standard CPS 230: Operational Risk Management.

Fintech’s growth and market potential

Fintechs range from digital-only banks to any technology used to streamline, digitise or disrupt traditional financial services. As the fastest growing financial sector, fintechs are disruptors with huge market potential. They’ve been embraced by businesses and consumers alike, with increased demand for 24/7 access to finances. Fintechs now have the opportunity to drive change, expand into other industries – and sometimes even scale up and expand into new markets. Those that thrive will have robust growth plans and innovative strategies. They also need to stay on top of challenges such as attracting and retaining talent, accessing much-needed capital to support growth, and keeping up-to-date with regulatory change in an environment that is constantly changing.

Increased focus on ESG transparency

ESG issues are high on the agenda with stakeholders including investors, customers and employees, demanding the adoption of sustainability practices and reporting. This presents both a challenge and an opportunity for all organisations in Australia, where there is an absence of any clear regulation around ESG reporting – just knowing where to start has been a significant challenge. While early adoption of ESG reporting is currently restricted by little guidance on reporting requirements and data points required, being on the front foot with measurement, implementation and disclosure of business activities will be key. Investors, consumers and the wider community will expect businesses to prove that profit and purpose are not mutually exclusive as “greenwashing” complaints are increasing globally. The reputational damage cannot be underestimated, so taking the right steps now is critical for your business and your stakeholders.

Governance and regulatory reforms in the banking sector

Regulatory reform is the largest challenge for the banking sector. Despite revenue growth, domestic banks including credit unions and mutuals have to navigate challenges such as the slowing growth in capital expenditure by the private sector, multiple reforms and changes to the capital framework. One of the major regulatory changes off the back of the Royal Commission is the adoption of FAR to replace the Banking Executive Accountability Regime (BEAR). As this presents some changes to reporting, transitioning from BEAR to FAR will require significant planning, a strong understanding of new responsibilities and accountability obligations.

Significant reform to private health insurance

Private health insurance (PHI) has already faced multiple challenges with COVID-19 restricting growth, rising premiums and a perception of poor value limiting the expansion of health insurance funds, especially amongst younger people. In addition, the next few years are expected to bring significant reform to the wider health sector and will have major implications on PHI, requiring funds to be prudentially sound, with strong risk management practices at their core. To remain competitive, PHIs need to focus on optimising member experiences, leverage emerging technologies and provide flexible service offerings.

Transparency and performance are the keys for superannuation

The reform agenda, designed to improve transparency and performance and enhance accountability remains front of mind for superannuation funds, employers and members. Additionally, superfunds are adopting net zero commitments by 2050 as part of the rising ESG focus of superfunds and increasing ESG investment options.

Asset Management continues to be reshaped by reform and changing expectations

Increasing regulation, margin compression and investor demands for returns and transparency in a challenging global environment have brought new challenges to the asset management sector. Changes to superannuation in particular will flow downstream to asset managers as transparency and performance is tested on an annual basis. ESG integration has continued to evolve quickly in Australia as asset managers integrate ESG into their investment decision processes.

SuperWomen Initiative

The Grant Thornton SuperWomen Initiative was born out of a commitment to listen to the challenges that women in the industry are facing and find solutions to assist some of the barriers for women in the industry.

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Darren Scammell
Partner & National Head of Financial Services
Darren Scammell

A laser focus of servicing clients | Teachers Mutual Bank

Founded in 1966, Teachers Mutual Bank Limited is one of the largest mutual banks in Australia, with over 198,000 members and assets of over $7 billion. Listen to Steve James, CEO of Teachers Mutual Bank, talk about contributing factors to their significant growth and approach to responding to changes in the market.

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