Google could be the biggest threat to the big four banks because of the trust online users place in it and its ability to engage with customers, according to banking executives.
(Credit: Darren Pauli/ZDNet Australia)
Managers from Commonwealth Bank, Westpac, GM Bank, Rabobank and Spain-based Bankinter chaired a panel discussion at FST media's Future of Banking and Financial Services conference last week where they were challenged by members of the financial sector on their apparent slack innovation efforts.
RaboDirect general manager Greg McAweeney told an audience from the finance sector in Sydney last week that companies such as Google and PayPal are more responsive and trusted than banks.
"If Google got up and said we are going to offer a savings account, for me, that would be very difficult and confronting," McAweeney said.
"They are a non-traditional bank yet they have great reach, access, distribution and trust — they probably have more trust than most of the banks.
"Innovation will come from that side of our industry."
Panellists cited emerging technology with an emphasis on online applications as a means for the credit unions to challenge the position of incumbent banks.
Commonwealth Bank executive general manager Kelly Bayer Rosmarin said that an online-only upstart bank may challenge the position of banks by appealing to young customers and reacting faster to trends.
"There could be an interesting play to be made in a completely virtual bank that is appealing to a different generation customer who is comfortable with a new form of interaction — a virtualising of services and new ways of managing and accessing money," Rosmarin said.
But Westpac chief technology officer Sarv Girn said innovation is not about gadgets.
"Banks can think all they want about whether they are innovative or not: at the end of the day it's what the customer thinks and it doesn't have to be the latest whizz-bang technology, iPhone or iPad," Girn said.
He said that the lion's share of innovation at Westpac is dedicated to security and resilience. The bank has tipped millions into improving IT security and redundancy around its internet banking and ATM networks, which has led to a 90 per cent reduction in critical security problems.
McAweeney said that a lack of cooperation between banks is preventing some of the best innovations such as centralised account aggregation across rival financial institutions.
"Online and token-based security can make the experience a bit clunky. I might want to see all of my accounts, but if I have a token with each it doesn't lend to the best customer experience."
Rosmarin said that privacy demands and a lack of publicity has grounded account aggregation.
According to CSC Australia director of banking Simon Millet, banks are not natural innovators.
"[Barack Obama] is famous for using the phrase 'lipstick on a pig'. I think we need to be conscious when, in reality, what is going on is a lot of creativity but not a lot of innovation," Millet said.
"Very little money is spent on [research and development], but it is the individuals in the banks that bring value."