Despite the rhetoric on the need to innovate, banks are still struggling to adopt newer technologies, while the time may now be ripe for the smaller players to move quickly on innovation.
According to the TAS Banking Industry Report 2018, only nine per cent of bankers plan to invest in the latest technologies. However, according to the survey of 50 bank executives, the sector is still grappling with how to use these technologies such as AI, automation, robotics, or blockchain.
The report also found that technology remains a key strategy and enabler for 28 per cent of leaders.
This finding suggests that there is a gap between the rhetoric on technology and the actual adoption of new technologies and systems.
"There is a recognition in the industry that innovations such as big data, analytics, AI and machine learning will be part of a bank strategy but the challenge for the sector is how to make that happen and transform," TAS chief Shane Baker said.
Baker was speaking on a panel at the launch of the report which included RACQ Bank head Michelle Bagnall; AMP Bank innovation czar Ryan Gonalves; and Flamingo AI chief executive Catriona Wallace - chaired by AB+F's Andrew Stabback.
The report and panel discussion also highlighted that there is an opportunity for smaller banks to leapfrog their larger peers in innovation.
For Wallace, Australia is laggard when it comes to embracing new technology.
"In the US, where I predominately do work, every conversation we have is how AI will transform banking. When I come back here we are still talking about going mobile first - that was three years ago," she said.
But Wallace reckons there is a huge ipportunity for second, third, and fourth tier banks to move quickly on emerging technologies with their larger peers still grappling with a number of issues on the legacy and regulation front.
"We find larger banks in Australia still have the challenges of integrating newer innovations into their business. Even the cloud is a new concept for them. The bigger the company is, the more difficult it is to integrate new technologies."
"Not that we don't love the big end of town, but we see faster take up of emerging technologies from blockchain to AI by the second tier banks," she said.
According to Baker, however, the royal commission could create an opportunity for banks to rebuild their reputation by harnessing smart technology to better service customer needs.
In fact, customer engagement was another key theme highlighted in the report. One in two banking leaders said greater customer engagement and experience is the key strategy for their businesses in order to remain relevant in the current environment.
RACQ's Bagnall believes mutuals are well-placed at the moment, highlighting that trust is RACQ Bank's primary asset.
"It's a good place for us to be in the next 24 months in an industry that will now have to rebuild that trust."
"Where our organisation is positioned right now is actually in a place 113 years ago," she said. "It started from advocacy for members; it has stayed in that same place. We can't squander that opportunity. We recognise that we have to be profitable but no driver super profits - we need to keep the member in mind."
Bagnall acknowledged that the opportunity created in the current environment is there for the mutual to lose.
"Our NPS is at 70, customer satisfaction is 90 per cent, our trust measures ate 94 per cent, that is what customers are telling us. That's ours to squander; we now need to ensure that we can leverage that to our advantage."
AMP's Gonsalves would not be drawn into the issues surrounding the financial services royal commission - he works for the bank, not AMP's financial services business - and instead highlighted that the bank remains focused on its competitive advantages.
"One third of bank leaders are aware of the competition encroaching on financial services. The questions is where in the value chain to banks want to play," he said.
"You need to be clear on what you want to be good at."
"We are looking at better ways to help our customers better manage their cash flow and debt and potential partnerships to help us with that strategy. That's our focus."
For the full report see the AB+F September print edition.