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A human-led approach is critical to tech-powered success

Tom Gunson

Apr 28, 2023 – 5.00am

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This content is produced in commercial partnership with PwC Australia.

When we talk about the future of finance and the role banks will play, it’s clear there’s a transition underway driven largely by changing customer expectations. Expectations are shifting faster than ever as a result of customers’ new experiences outside banking and within, those currently available and those yet to be fully realised such as faster payments infrastructure and capabilities such as consumer data right (CDR).

The banking transition now taking place in Australia must blend digital and human to meet changing customer expectations. Combining tech, such as Web3 and artificial intelligence (AI) systems, with all the things that make us human – – difference, judgement, care, empathy and understanding, will help banks provide a superior customer experience.

The banking transition taking place in Australia must blend digital and human to meet changing customer expectations. istock

While managing this transition, Australia’s banks are also facing several short-term challenges including inflation, global economic uncertainty, cyberattacks, scams and regulatory changes.

Some of these are such complex issues that organisations are unable to solve them on their own. Forming a community of solvers – leveraging partnerships and ecosystems, sharing data between stakeholders, and collaborating across the industry will deliver sustained outcomes for customers and the community.

Australia’s banks must work with governments, telcos, and regulators to address some of these short-term challenges as well as accelerate the longer-term transition on key national, business and consumer issues - issues such as “know your customer” (KYC) compliance, scams and cybersecurity, digitisation and faster payments, and the role of digital ID.

Take the threat of scams, for example. The most recent ACCC report put total losses because of scams at $3.1 billion in 2022. Australia’s banks need to meet this threat head-on and one of the greatest tools in the fight against scams is customer awareness and education.

Working with customers to protect them against scams through proactive communication about scam risks and prevention strategies, and providing specific guidelines detailing how they can protect themselves from falling victim to scams will help build customer trust and confidence.

Banks must also effectively maintain compliant KYC processes by verifying and authenticating customer identities – a rigorous identity verification process is essential to prevent scammers from infiltrating systems and stealing personally identifiable information (PII).

The banks being part of a national digital identity framework could help them meet their compliance requirements, which are estimated to reach $3.6 billion for Australia’s financial services industry, but also make this rigorous process far more customer-friendly.

One of the most important elements of the current transition is the move to digital and replacement of legacy technology, to deliver the experience customers now expect and also to deliver much needed and long promised efficiencies and resulting productivity gains.

While Australia’s banks spent an estimated $19 billion on tech in 2021, billions of dollars more will be required in the coming years. The only way banks will reduce costs and remain competitive is by investing in automation and other new technologies, as well as digital uplift to meet customer needs and address the legacy tech debt.

The payback for banks and customers will only be realised if this is used as a catalyst to drive simplification of products, policies and processes. Upskilling their existing workforce in key digital and technology capabilities is needed. It’s also another opportunity for Australia’s banks to access these capabilities via partnerships rather than through the traditional build or buy method – as their counterparts overseas have effectively done.

Partnerships and ecosystems can provide access to new market opportunities, capabilities, and digital assets – plus offer banks a way to innovate at scale, address skills shortages, drive growth, and meet sustainability requirements.

At the same time, banks must invest in the digital skills and financial literacy of their customers, and raise the digital acumen of the community to remain globally competitive and maintain their social license.

Another important part of the digital transition is the changing role of the branch. With APRA reporting a 30 per cent drop in bank branches in the past five years and the Australian Banking Association seeing a 68 per cent fall in foot traffic inside branches, Australia’s banks will need a different set of capabilities and skills for the future.

The rise of digital banking means branch visits will increasingly involve more complex conversations, i.e. hardships and disputes, and transactions they are less confident to complete digitally, so banks need to upskill their branch workforces accordingly.

The challenge for Australia’s banks lies in meeting evolving consumer and community expectations and to do this, banks must be at the forefront of innovation. But, there will always be a need for bankers and bank branches. Just because you can (eventually) teach AI to recognise customers’ faces doesn’t mean it’s the only way to do business. Technology will be a massive enabler in the future of finance, but banking will remain human-led.

Tom Gunson is Financial Services leader at PwC Australia