Banking needs to stay ahead of technology curve

THE banking industry is going through a significant period of structural change.

THE banking industry is going through a significant period of structural change.

There are three critical forces driving this: first, we have seen an unprecedented volume of regulatory change, both globally and ­domestically, and the pace and intensity of this change shows no sign of abating.

Simultaneously, this rapidly changing regulatory world comes at a time when there is continuing need for investment in market-leading banking solutions and intense competition from the established players, all of whom are looking to protect their positions in a dynamic and fast changing market as well as new players.

Finally, and perhaps most importantly, there is the digital revolution imposing disruptive change to the industry — a phenomenon driven by the customer.

For established players, this potentially presents the biggest threat, opening our industry to new competitors, some which are just starting up and some of which are already formidable players in their core industry. It also offers opportunities for businesses that can think on their feet and respond directly and promptly to meet customers’ needs.

We all know that as a general rule people don’t like change — therefore it’s critical to have courageous leaders who can lead and, indeed, thrive in a rapidly changing world and importantly can anticipate change to capitalise on the opportunities. For Westpac with our nearly 200-year history, we must in the words of our new chief executive, Brian Hartzer, “think and act like a 200-year-old start-up”.

With more than six million customers, more than 680 branches, turnover of more than $5 billion a year, for me as a leader Westpac’s Retail Bank is a world of possibility.

On any measure, this is a very big business to transform and requires leadership not only from the top but also at the local level. It starts with empowering our frontline bankers who understand their customers and communities better than anyone in head office.

To achieve our vision, we must harness all of the possibilities — the digital world may be daunting but there is no doubt it provides us with the opportunity to provide customers with more choices and an even better banking experience. We also need to learn the lessons of how such innovation has changed businesses from a customer’s perspective.

For instance, 10 years ago it would have seemed inconceivable that the biggest seller of books would be Amazon and the entire music industry would be turned on its head with innovation from Apple’s iTunes to Spotify and Pandora. At the same time, we have seen the disappearance of video stores, music outlets and well-known branded book shops.

In each of these examples, the disruption has been embraced and led by customers who find and demand ever increasing value from business.

The knee-jerk reaction is that this won’t happen with banking, that digital developments will, by and large, be benign, and that new entrants won’t threaten us as the regulators won’t allow it. I disagree. Customers will essentially choose whom they engage with for their banking needs based on a complex array of needs and perceptions — whether they choose to bank with non-traditional players is entirely up to them.

The good news is that despite these new players, many people still want to deal with their bank. For example, in the Deloittes 2014 Mobile Consumer Survey, 73 per cent of respondents said that the institution they trusted to facilitate mobile payments was their bank.

However, this doesn’t necessarily guarantee they will stay with us in the future. In trying to “think and act like a 200-year-old start-up” as we face rapidly changing customer demands, we need to use all of our experience, knowledge and capabilities in new and innovative ways and then move quickly to meet these demands.

In banking, our customers are absolutely the ones in control. And I know it’s the same for many of you with your businesses.

Customers can now self-serve at times and locations more convenient to them, whether for flights, music, and other forms of entertainment.

Customers now have very different expectations around ease, convenience, speed, availability, security.

They judge their banking experience not by their experience with other banks but with other industries.

The banking industry needs to respond; otherwise new entrants will snap up the opportunity. And once lost, that ground is very hard to make up as we have seen from other sectors.

Gai McGrath is the general manager of Westpac retail. This is an edited extract of a speech delivered on Friday to the ABF leaders lecture series.