The evolution of Australia's Financial Service Industry
In the past few years, the Australian financial service industry lost the trust and support of its customers from across the globe. The Commonwealth Bank of Australia (CBA) Report, the Royal Commission and the increasing number of complaints with the Australian Financial Complaints Authority (AFCA) - all paint the same picture: traditional business practices are not acceptable anymore. They need to evolve to meet consumer and community expectations.
Even the regulators APRA and ASIC have to prove that they are fit for purpose. To date, they have both already taken a tougher stance on regulatory breaches, i.e. the number of litigation cases increased. In addition, banking executives who resigned voluntarily, were fined or even barred from their profession. Scrutiny of financial organisations amplified as ASIC placed staff within institutions in order to identify key drivers for misconduct.
Additionally, new international players, Fintech frims enter the Australian financial market establishing themselves as low cost alternatives to more traditional institutions. With the increase of competition, regulatory supervision and customer remediation, value propositions across the financial service industry have to be reviewed and adapted.
This poses a variety of challenges for Australian organisations. Addressing these requires a new set of skills and competences which are hard to find in the local talent market.
Lessons learnt and best practices on an international Level
Financial institutions especially in Europe faced similar challenges in the aftermath of the Global Financial Crisis (GFC). Customers and communities distrusted their banks and financial advisors. Even now, organisations still struggle to regain that trust. Governments and regulators had to take firm action fining organisations in the billions of dollars for each breach in each jurisdiction. Further to that, organisations had to remediate customers and finance organisation-wide transformation programs to address systemic issues or implement new regulations.
While such transformations already possessed an inherent level of complexity, coverage of multiple jurisdictions at the same time increased the number of interdependencies even more. Managing such a level of complexity cannot be learnt from a textbook or through introduction of an accepted standard. Only through hard-gained experience these transformations could deliver agreed objectives. Other lessons learnt included:
Customers play an important role for the long-term sustainability of a business. During good times, this may have been forgotten in the pursuit of profits. However, as times became more difficult this simple truth was remembered. To rebuild trust, unfairly treated customers were remediated with a long-term focus. A strategy, which appears to have worked well, was to reimburse customers fully, in a timely manner and offer an additional reward as an apology for the unfair treatment.
Large-scale transformations usually required clean-ups after 1-2 years of operation. Exception to this rule were transformations which received sufficient funding and expert resources. Both proved to be key ingredients to establish a sustainable solution designed to be operated for many years. In fact, these transformations turned out to be more cost effective since they eliminated the need for remediation with expensive resources after 1 or 2 years.
Another lesson learnt was that cross-selling of products & services could result in regulatory breaches and substantial fines. While products and services were designed for a specific target customer segments, selling these products/services to other segments could result in detrimental outcomes for these clients. Subsequently, these customers felt treated unfairly, had to be remediated and the regulatory breach reported to the regulator. To minimise this risk, cross-selling of products and services was restricted enhancing product/service suitability for clients.
How Australian organisations can benefit from international experience
Australian financial institutions are in a unique situation. While they face challenges similar to the ones faced by overseas institutions, Australian organisations can benefit from the hard-gained international experience. The easiest way would be to look for talent with the appropriate competence profile on international level, meet expectations of these candidates and place them in crucial positions throughout the organisation. These positions have to be equipped with a sufficient level of decision-making and execution power. Engagements could take the form of interim assignments, contracting or full-time employment.
Attracting candidates with the right competence profile represents a shortcut to readying the organisation for future challenges while addressing legacy issues. The transformative journey of the organisation will certainly be enriched with such international experience.