Open banking, digital banking, cloud-based infrastructure and RegTech are the key drivers of technology-led change in the Australian banking sector, according to S&P Global Ratings.
Fintech firms and open banking are likely to bring significant changes to Australia’s banking sector in the products banks offer and the way they deliver them, according to a new report by S&P Global Ratings.
In its report entitled ‘Future Of Banking: Fintech Flags Turning Point For Australian Banking’, S&P said that technological developments can give Australian banks the ability to differentiate themselves and improve customer service.
Customers are likely to benefit from increasingly personalized product offerings, facilitated by growing data availability which allows banks to see customers’ financial profiles across multiple institutions and industries, said report’s author Nico DeLange.
“The ability of banks to take advantage of financial technology may ultimately affect their competitive dynamics—one of the key considerations in our assessment of credit quality,” he added.
By catering to increasing customer demand for greater personalization, banks will be able to compete on more than product prices. Banks that do not commit to digital transformation, the report notes, risk falling behind.
S&P expects the industry to restructure in order to develop leaner operating profiles to minimize costs through the use of technology. However such a reordering is not without risks. Operational challenges of moving to new core banking systems and the responsible management of newly available customer data are potential pitfalls facing banks as they undertake changes to their business models.
However, the report states that there is scope for significant risk reductions through real-time payments processing and RegTech (regulatory technology), including artificial intelligence-driven fraud monitoring. The authors of the report highlight three main areas that are likely to drive the growth of fintech in Australian banking – open banking and data driven analysis, digital banking and the cloud, and RegTech .