Banks shift priorities toward digitalisation and innovation for future growth

Thursday, 1 February 2018

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  • More than half of Australian banks expect to become digitally mature or digital leaders by 2020
  • 80% of Australian banks are likely to set up partnerships or joint ventures in the next 12 months
  • Addressing cybersecurity threats and enhancing security is the top priority for banks globally in 2018

Eighty percent of Australian banks and 85% globally cite implementation of a digital transformation program as a business priority for 2018, with investment in technology to drive efficiency, growth and manage evolving risks increasingly seen as critical for sustainable success, according to the EY Global Banking Outlook 2018.

The survey of senior executives at 221 banking institutions across Asia-Pacific, Europe, North America and emerging markets, found that globally just 19% of banks surveyed currently view themselves as being either digitally mature or a digital leader, while in Australian none of those surveyed did. However, it also showed there is an obvious recognition among banks of the urgency of continuing to innovate and embrace digitalisation, with 60% of Australian banks aspiring to reach digital maturity by 2020 (almost on par with the global average of 62%).

EY Oceania Banking and Capital Markets Leader, Tim Dring says: “With the pace of technological change and the speed at which new innovations are hitting the market, it’s not surprising that banks are increasingly focusing on their digital agendas. Australian banks have already made significant progress in this space and we are already seeing them make significant advancements in areas such as mobile payments platforms, fraud protection, biometric authentication and the use of robotics process automation.”

“Australian’s have always been early adopters of digital and mobile technology – in fact, the recent EY FinTech Adoption Index found that we have the fifth highest rate of FinTech adoption in the world. So, I think what we are seeing in the comparison of digital maturity level is that Australian banks are likely to be benchmarking themselves against emerging competitors and online leaders in other industries, who have more digitally-focused business models and less legacy technology systems to navigate. Whereas banks in other markets, like the US where cheques are still prevalent, may be benchmarking themselves against more traditional competitors.”

“Eighty percent of Australian banks surveyed also stated they are looking to set up new partnerships or joint ventures in both core and new strategic markets in 2018. So we are likely to see even greater collaboration between traditional financial institutions and e-commerce and other technology platform players, particularly as the open banking reforms progress,” Mr Dring says.

Globally, addressing cybersecurity is the top priority for banks (89%) in 2018, replacing last year’s top priority of managing reputational, conduct and culture risks, which falls to sixth place in this year’s report. It’s also high on the agenda for Australian banks, with 80% of those surveyed listing it as a key priority area for the year ahead.

At a regional level, the survey further found that banks in developed Asia-Pacific markets (incorporating Australia, Hong Kong, Japan and Singapore) are focusing on developing partnerships with fintechs, investing in technology to reach customers and improving risk management, with 82% listing these as their top business priorities for 2018.

“Ten years after the global financial crisis, banks are experiencing increased competition from a range of new market entrants and evolving risks that challenge their ability to deliver sustainable profitability. In order for banks to weather the performance challenges that lie ahead, they must emerge from an era of regulatory driven transformation and prepare new strategies for a future led by innovation and technology,” Mr Dring says.

Other key findings from the global survey include:

  • 59% of banks surveyed globally anticipate that their technology investment budgets will rise by more than 10% in 2018
  • For those banks that are beginning to invest or increasing their investment in new technologies, 44% plan to purchase the technology from a third party, while only 17% plan to acquire an entity to onboard the technology
  • 70% of banks globally cite strengthening their competitive positioning as a key reason for investing in technology by 2020
  • Enhancing cyber and data security is the number one priority for banks globally, with 73% of banks planning to invest in technology to mitigate cybersecurity threats.

The complete report is available to download here.

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Notes to Editors

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About the EY Global Banking Outlook 2018

For this report, 221 banking professionals across the global were surveyed between November and December 2017 to provide a review of banks’ reported financial performance, strategic priorities and technology adoption over the next 12 to 36 months. The respondents came from 29 different markets. Of the banking professionals surveyed globally, 33% were from Europe, 10% from North America, 13% from Asia-Pacific developed, 19% from Asia-Pacific emerging and 25% from Emerging.