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Six reflections on Australia's banking sector

Deloitte has proudly sponsored the AFR’s Banking Summit since 2016. This year’s Summit was jointly opened by the AFR’s Editor-In-Chief Michael Stutchbury, and David Myers, the firm’s national banking and capital market sector leader. David reflected on six challenges facing the sector, outlined here.

There is no doubt that the banking sector is vital in our economy and the Summit offers a stimulating environment for discussions about the challenges and opportunities the banking sector faces here in Australia. In particular, how regulators, banks and other stakeholders can continue to make sure customers and users of our banking regime receive the best possible outcomes, every time.

Here are six reflections on the challenges we face:

Let’s start with the tragedy unfolding in Ukraine – this is not a banking sector issue or challenge per se, but it impacts humanity and can’t be left unsaid. We all acknowledge what’s happening to Ukrainians and their beautiful country and can’t ignore the broader geopolitical issues at play.

Climate also dominates the conversation. Enough said. We need to talk less, and do more – not in isolation, but across sectors and in ecosystems with diverse and complementary skills.

More specifically, Environmental, Social and Governance is becoming increasingly important – everyone thinks about climate and the need to take climate action – and that is absolutely right. But I strongly believe we cannot lose our focus on the S of ESG; Social. Take modern day slavery as an example. Or the fact that there are many Australians across a variety of socioeconomic backgrounds who don’t have access to the same banking capabilities and services the rest of Australians do. Where is the equality in that?

Then there’s the cost of financial abuse, which mostly affects women (1 in 30 in 2020). We recently published a study that showed it cost financial abuse victims $5.7 billion in 2020, with an additional $5.2 billion cost to the economy. And what can the sector do to improve financial inclusion for everyone in society?

Meanwhile we’ve witnessed phenomenal growth in digitisation, which is true across the world. Here in Australia customers expect a digital-first experience – with easy access to a human touch when needed.

Payments and digital currencies are also taking off and challenging the way banks operate, let alone creating new avenues for cyber criminals and unethical behaviour and the need to respond to this. Buy Now, Pay Later has well and truly kicked off in Australia – but the regulator is assessing its appropriateness for all customers.

Finally, we all see the ‘double whammy’ impact of both increasing interest rates and rising inflation – but what are the consequences to everyday Australians? We need to thread the needle between two mistakes:  hurting Australians with interest rates that rise too slowly now – thereby leaving lingering pain on mortgage rates amid a belated clean up later – and raising them too quickly in a way that threatens an unemployment rate that’s at a half century low.  Getting that balance right is vital for both the nation and for its banking sector.

Suffice to say, we live and work in a complex environment with challenging external factors at play that are tricky to manage. But it’s also dynamic, and full of potential, driven by data, its insights, and the ability to pivot more quickly than ever before in response to changing expectations and disruption. We will touch more on this throughout the today.

We have every reason to be confident about the future. Banks are resilient and have weathered crises. Remediations have been paid. Disposals have been made. For the most part, the way business is done has been simplified. All of this grit has laid strong foundations for healthy growth trajectories. I’ve seen how banks persevere through adversity, like the Financial Crisis, and come out better at the other end. They have reset operations. Joined up services to benefit all. Regained trust. The same will be true here in Australia after the Royal Commission.

I’m looking forward to seeing what is on the other side of change. Not just to next year, but to 2025, 2030 and beyond.