Speaking at a Bloomberg event in Sydney yesterday, ANZ chief executive Mike Smith said the “digitalisation” of financial services is both “a threat and an opportunity” for the banking sector.
Commenting on the entry of retailers and supermarket chains into the sector, Mr Smith pointed out that banking is “not as easy as it looks”.
But he acknowledged the threat posed by the emergence of non-traditional competitors to the banks – particularly when it comes to distribution.
“For banks that don’t change and don’t embrace this new technology, I think that that will be a problem,” Mr Smith said. “Should we be worried about it as a bank? Yes.”
Mr Smith recalled a conversation with the chief executive of a large European company: “I asked him what his culture was, and he said ‘paranoid’. I thought that’s a bloody good answer,” Mr Smith said.
“You should always be paranoid about what other people are doing, about what your competitors are doing,” he said. “And I think now is a time we have to be a bit paranoid."
The current era of digitalisation is just as significant as the industrial revolution, he added.
“This is another complete tipping point in history, because technology now enables you to do things that would just be impossible previously,” Mr Smith said.
“It’s the pace of change – the way that we now use technology and our expectations of the service are now fundamentally different,” he said.
It is also not good enough for banks only to be watching what their direct banking competitors are doing, Mr Smith continued.
“[We have] to look at what Alibaba is doing, what Google is doing, what Amazon is doing,” he said.
“The big problem that banks have got is their IT systems are designed around an accounting system.
“Core banking is all about an accounting system, and we have to move to a customer-driven system – a behaviour-driven system. We have all the information; it’s a question of making that transition,” he said.
“I think the banks that get this right are really going to benefit enormously – because then you can access markets you couldn’t before."
