Every year, we spend time interviewing our clients to better understand their business and the trends most impacting on them. In the financial services sector, we have a range of mid-sized clients across banking, superannuation and insurance.
It’s a highly regulated sector and with the Royal Commission into misconduct in the banking sector drawing to a close, the entire financial services industry is awaiting Commissioner Hayne’s Final Report and recommendations to see what the future may hold for the industry.
In FY18, our clients in the financial services sector revealed that the top three concerns for the industry were risk and regulation, talent management and operations.
These three themes all dovetail with revelations from the Royal Commission – which has highlighted (particularly for the larger players) that the culture pervading major financial institutions is one of “profits over people”. And with approximately 98.9% of adult Australians with at least one bank account, those values are the wrong way around.
Luckily, many of our clients in the banking sector are customer-owned and not-for-profit and have avoided many of the pitfalls that the ‘for-profit’ banks have found themselves in. However, we know that there will be regulatory changes, reviews of governance structures, and potentially even new roles required off the back of the Royal Commission. This will likely be blanket regulatory change, although we have been working with the Customer Owned Banking Association (COBA) on a piece of work advocating for proportionate regulation in the sector.
Talent management, and in particular governance, sits snugly alongside regulation – and we are already seeing the major banks making changes to their Boards and their internal structures to ensure they have the right people in the right roles to drive cultural change aimed at providing the right kind of oversight to better protect their customers. The aim will be to increase diversity, Board accountability and transparency to stakeholders – and to be honest, this will be greatly needed to help re-establish trust in the financial services sector.
On a micro and macro structural level we are also seeing change – while the big banks are reviewing their vertically integrated models and divesting some of their assets off the back of inquiries and the Royal Commission, we are seeing new entrants into the market in the fintech space. Online/digital first banks are not only streamlining and reducing their overheads by not investing in bricks and mortar but are also catering to the growing demand for 24/7 banking from the convenience of smartphones. We’ll see greater competition from peer-to-peer and marketplace lenders. There are already apps leveraging off Australia’s move away from cash to card and helping people to digitally save money – the equivalent of the coin jar or piggy bank many of us grew up with.
And of course, the smartphone has completely disrupted the banking sector. With nearly 47% of Australians having banked online at least once in the 12 months up to May 2018, all banks – from the traditional to the digital, and the big and the small – are investing in technology to improve efficiencies, manage multiple accounts and create a seamless financial ecosystem for their customers. How we bank, and who we bank with, in five years’ time could be very different to how, and who, we bank with now.
Thank you to all of the clients that we have interviewed in FY18 and if you have any questions about the trends impacting the financial services sector, or how we can support your growth strategy, please feel free to drop me a line.