Universal banking will be ‘broken apart’ by fintechs, says CEO

Speaking at a media briefing after AMP’s Amplify Festival in Sydney on Wednesday (13 June), futurist, author and start-up founder Brett King said that digital disruption will revolutionise the mortgage experience in the near future.

According to the CEO of banking technology provider Moven, in the next 20 years, finance will be made much more experiential and less product-led. 

Mr King outlined that as the younger generations became more brand-agnostic and more focused on convenience and speed of service, bank branches and the traditional way of banking will change.

He said: “For most Millennials and certainly for Generation Z, they will not think in terms of going to a bank to open a bank account... that is just not one of the options that crosses their mind. They go straight into the app store or ask their friends, etc.

“If you see the way that fintechs are developing, there is no fintech challenger bank that wants to be a universal challenger bank and that is because we are realising that that is not how Millennials will engage with these brands. They will pick and choose the best solution at the time, so we think, actually, technology will result in the breaking apart of the whole universal banking model as a concept.”

The futurist went on to outline that technology in the financial space has been moving at a rapid pace, and that the near future could see mortgages delivered by voice command and augmented reality systems. 

“I think the voice and AR-operated systems will probably become the platform for that in the next 10–15 years,” Mr King said. “Ultimately, when you have the lowest friction engagement, then what we do today is we need the adviser right now to select the right mortgage. The technology will be able to do that for us... and increasingly it will become the tech.”

One aspect that will need to deliver this technology successfully will be pre-approval for mortgages.

Mr King said: “We think pre-approval is a very important construct here. If you think about lowering friction, one of the key data competencies that financial services organisations will have to have is the ability to approve in real time. If you have to wait to approve someone for a mortgage or a line of credit, you are going to miss out on the business in the future. You can just see that [happening] down the continuum of lowering friction...

“Right now, the only reason it takes weeks to get an [insurance] claim resolved is process. Technology can reduce that [decision] to instantaneous.”

He said that this model could “certainly” be seen with mortgages.

In Mr King’s outline for the future lending landscape, he suggested that new players, such as Airbnb and Uber, could come to the fore as underwriters as the sharing economy becomes more pervasive.

The futurist added: “We have this path where we’re lowering and lowering the friction, making it faster and simpler for people to get access to a product. The other driver here is the economies of distribution — we’re moving to digital distribution, digital sign-ups and so forth because it is far cheaper. So, if you track those two things to their logical conclusion, you get instantaneous access to financial services with almost zero friction. That is the outcome of where we are going.”

Speaking in relation to AMP Bank, AMP Bank group executive Sally Bruce said that this type of disruption was facing industry as a whole. She said: “[T]he challenges facing all of us, whether you are a financial adviser, a broker, an S&P 500 or a bank, is actually to participate in this conversation so you evolve. And you evolve in a way that is relevant and has utility.

“I don’t think it is a message to take away that these [technological disruptive] things are going to be king-hit. It’s a message of these markets are all going to be disrupted and you have to participate in the conversation and the thinking to evolve appropriately.”

As such, Ms Bruce said that AMP Bank was “pretty well positioned” moving forward.

The group executive said: “AMP bank is pretty well positioned in some regards because we don’t have a strategy to replicate the major bank arrangement or even the larger regional banks who are providers of all things to all people. So, we are very focused on the retail market and working on how we can reach more customers in that way.

“When someone is looking from first principles, they are not looking to build a branch network, they are not looking to replicate all things; they are looking to focus on purpose and excellence around that and how to reach those customers. So, we are actually pretty well positioned in that regard. Obviously, we have to evolve. We have to continue in these dialogues and educate ourselves in [digital disruption] and we are investing in the bank currently to innovate, to employ more automation and the use of chatbots, developing products like the Bett3r product, or at the group level — Goals 360 — but from an AMP Bank perspective, we have a real advantage.

“Historically, the bank with the largest network was therefore the most valuable bank in the country. This is now not an asset, it’s a legacy cost. So, if you look at the cost-to-income ratio of something like AMP Bank and the return on equity, it far outperforms the incumbents and that gives us real agility and the ability to invest in the future and what we chose to be.”

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