THE TOP 8 BANKING TRENDS OF 2019 - From Risk to Reward
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THE TOP 8 BANKING TRENDS OF 2019 From Risk to Reward
CONTENTS
“
Introduction 1
1. Unbundling and fragmentation 2
— the cracks are beginning to show With the release of the Banking Royal Commission report,
risk and reward will be important considerations for the
2. From products to promise 2
Australian Banking Industry as they manage the threats
3. The opportunity or twilight 3
and opportunities to their business and try to gain the
of community banking? trust of consumers once more.
4. The Chinese are going global 3 The enclosed trends focus on some major external impacts
that will make 2019 a tough year for banking in Australia,
5. The tipping point for fintechs in Australia 4
laying the foundation for profound industry change.
6. The beginnings of build and migrate 4
7. Head (and brain) in the clouds 5
8. Welcome, ‘platform’ police 5 ALEX TROTT, BANKING LEAD,
ACCENTURE AUSTRALIA AND NEW ZEALAND
1 THE TOP 8 BANKING TRENDS OF 2019Unbundling and From products
fragmentation — to promise
the cracks are
beginning to show
Banking has traditionally been a Australian ‘neo banks’ such as Volt are How far do you trust your bank with All organisations need to be careful
vertically integrated business in primed to focus on customer acquisition your personal information? Asking to ensure loyalty and trust is improved
Australia. That industry structure is enabled by this newly accessible Alexa, Ceba (CBA’s chatbot) or any other in all interactions.1
now beginning to fragment, amid a customer information, following its AI assistant for banking help has fast
tumultuous period for the big four banks, recent award of a full banking license. become table stakes. Achieving a trusted customer-centric
with conduct, transparency and culture banking sector requires banks (and other
under the microscope. So, in 2019, we will undoubtedly see What is likely to emerge in 2019 is a new financial institutions) to institute ethical
further fragmentation, specialisation class of digital advice that focuses on sales practices, better controls over
The Royal Commission aside, there are and competition from third parties, true financial wellness, a step further conduct, and a shift in organisational DNA.
also further regulatory pressures at play, but we will also see the banks trying to than current AI assistants which are
with Open Banking set to begin beta re-bundle those components through customer service focused. Banks must also adopt a customer-
testing with the big four banks from partnerships into attractive and holistic centric approach to win back trust;
July 2019. customer propositions. These advisory services will draw in part that involves improving the
both on banking and non-banking customer experience.2
The intent of the Open Banking regime However, underlying this is the enduring data to provide hyper-relevant advice
is to create more competition and issue of trust and how willing consumers and suggestions. As banks see your Of course, banks need to make sure
value for the consumer. This ongoing will be to share their financial data. payments flow, they not only know what that their own house is in order first
fragmentation is creating new horizontal you are spending, but also what others by ensuring best advice for their own
business opportunities and encourages are spending. This will allow them to products. But beyond that, they are
the entry of Fintech’s and other identify that you are paying more for ideally placed to promise their customers
emerging competition. your utilities than your neighbour, or that they, if given a chance, will make the
that you are paying full price for your car totality of their financial lives better and
lease, rather than taking advantage of more rewarding. That is where the advice
current refinancing offers. trust bar will be set in 2019.
2 THE TOP 8 BANKING TRENDS OF 2019The opportunity The Chinese
or twilight of are going global
community banking?
These should be golden days for The traditional response of smaller banks The stunning transformation of retail In December 2018, Commonwealth Bank
smaller community or mutual banks. would be higher levels of mergers and financial services in China is becoming adopted Alipay through Albert and its
The economy has been booming, acquisitions to reduce costs, but the new a well-known story. Between Alipay and ePay app, allowing Chinese consumers
interest rate spreads have widened, challenge in 2019 is to figure out how WeChat pay, China now has well over to use QR code-based payments
credit losses are minimal and smaller banks can offer better digital a billion regular users of mobile payments in Australian stores.
compliance costs (pre-Banking Royal services without spending who last year conducted two-thirds of
Commission) were at last coming down. billions of dollars. all global mobile payment transactions. It’s only a matter of time before
innovations from China also begin to
Profitability is under pressure and will If they can’t, they will continue to lose Viewing this phenomenon from a seat reshape the Australian banking industry.
continue to be so, but the existential customers to new entrants or their in the West, it’s tempting to say that
threat for these banks is now a lack bigger competitors, and 2019 may see what’s happening in China doesn’t affect
of growth. Being small and local us enter the twilight of the community us. However, with 1.39 million Chinese
(with a better, trusted brand) isn’t banking era. visiting Australia from February 2017 –
the competitive edge it used to be. February 2018, spending AUD$10.4B,3
improving the ease of payment is crucial
for our economy.
3 THE TOP 8 BANKING TRENDS OF 2019The tipping point for The beginnings of
fintechs in Australia build and migrate
Accenture research shows Australia The reaction of incumbent banks has One of Accenture’s 2018 predictions deliver these architectures will be
has a large cohort of financial services been to upgrade their core digital was that few big banks would risk a key success metric. Not everyone
consumers considered ‘nomads’ who services, and co-fund the new group removing out their antiquated legacy will immediately succeed.
are much more open to digital channels of competitors through vehicles such systems, but instead would look to wrap
than other consumers.4 as Reinventure (Westpac) and NAB them in digital services that enabled However, so far, these solutions are
Ventures (NAB). more speed and agility. mostly targeted at relatively simple retail
Collectively they control liquid and SME customers. The big question for
assets of an estimated AUD$2trillion. Market share data in 2019 will start While there wasn’t a lot of replacement 2019 is whether we will see any traditional
Focusing on this market when amplified to give us an indication of whether in 2018, we have seen plenty of interest banks take the leap and move from a
by a combination of eroded trust in new entrants have enough momentum in additions to enable speed of change parallel digital build to a migration of their
traditional banking and a regulator keen to win long term, or whether the immune like Zafin which enables personalised legacy banking systems to one of these
to stimulate competition has enticed system of traditional banking will be pricing for deposits / lending. new solutions.
fintechs to enter the Australian market strong enough to fight off this infection
e.g. 86400, Tyro and Volt Bank joining from digital newcomers or absorb them. In 2019, we are going to see a lot So, 2019 still won’t be a year of rip and
UBank and ING Bank. of build activity on these new systems replace, but it could be a year of build
with banks experimenting with new and migrate. The largest mitigating
These banking start-ups, and value technical architectures that are digital factor will be the findings of the Banking
add services like Gobbill, AirWallex to the core, like NAB’s migration of core Royal Commission and the risk and
and Afterpay are signing up new applications to the cloud. How the banks compliance overload this could place
customers, but have more to do to adopt these new ways of working to on these organisations.
win widespread adoption and trust.
4 THE TOP 8 BANKING TRENDS OF 2019Head (and brain) Welcome,
in the clouds ‘platform’ police
Another prediction from 2018 was that with should dictate where the Our last prediction for 2019 is that the In 2019, any bank that wants to talk about
the debate on migration to public cloud investment goes, and this can only word ‘platform’ will be banned in at least being a platform business needs to be
was essentially over. What’s interesting come from collecting more data to one bank. Often a perfectly useful term very specific about the business model
for 2019 is how quickly the debate has analyse, introducing a paradox with is stretched to the point where it it is trying to pursue and stop throwing
moved on from the cost and scalability data collection and privacy. While becomes meaningless. Unfortunately, the word around.
benefits of being in the cloud to data many people assume their individual that was the fate of ‘platform’ in 2018.
and analytics. data set is desirable in its own right, A pure platform business would be
organisations actually want it most A true digital platform business is an economic suicide for most banks,
At the recent AWS re:Invent conference when it’s part of aggregated data.5 easily accessible, two-sided marketplace as it would involve giving up their
much of the focus was on what to do that makes money by bringing buyers balance sheet. So, if people in your
with your data once it’s in the cloud and, We are moving to a world where every and sellers together, like eBay, Airbnb bank start to talk about ‘platform
specifically, the analytical tools available banking carpenter will have the same or Uber, and driving growth through banking’, please keep asking them what
from cloud providers. toolbox and be able to access many of network effects. they mean until you get an acceptable
the same raw materials. The distinction and clear answer. It could take a while.
This move from a bare-iron pitch to the will come from picking the right piece Aggregation flips the usual business
allure of an intelligent brain indicates of wood and knowing how to create model in the digital world by becoming
that the winners in digital banking will something of value from it that will demand driven, not dictated by supply
be defined by offering creativity matter in 2019 and beyond. side constraints. In the digital world,
and data quality, not the quality of where distribution costs are effectively
algorithms. Understanding what zero, controlling demand becomes more
customers want and will engage important than supply for an aggregator.6
5 THE TOP 8 BANKING TRENDS OF 2019END NOTES CONTACT US
1
Trend 1 – Silence is Gold ALEX TROTT
https://trends.fjordnet.com/Trends_2019_download.pdf Managing Director, Banking and Distribution & Marketing Lead,
2
Accenture A Questions of Trust Accenture Australia & New Zealand
https://www.accenture.com/t20181105T065550Z__w__/us-en/_ alexander.t.trott@accenture.com
acnmedia/PDF-84/Accenture-A-Question-Of-Trust.pdf
View LinkedIn profile
3
Minister for Trade, Tourism and Investment
https://trademinister.gov.au/releases/Pages/2018/sc_mr_180418.aspx
Accenture Banking as a Living Business
STAY CONNECTED
4
https://www.accenture.com/t20180724T143740Z__w__/us-en/_
acnmedia/PDF-32/Accenture-Banking-Living-Business-Australia. www.accenture.com/banking
pdf#zoom=50
Accenture Banking
5
Fjord Trend 3 – Data Minimalisation
https://trends.fjordnet.com/Trends_2019_download.pdf @bankinginsights
6
Aggregation Theory - Stratechery by Ben Thompson
https://stratechery.com/2015/aggregation-theory/
ABOUT ACCENTURE
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