Speaking at a business forum at the 32nd Australasian Finance and Banking Conference in Sydney on Monday (Dec 16), Mr Kearns said several issues facing banks could potentially lead to changes even more important in the years to come.
The first is widespread and increased access to, and ability to process, large amounts of data.
“This facilitates the emergence of new technological competitors for banks, which could potentially impact their dominant position in the financial system,” the RBA’s head of financial stability said.
“The second reason concerns the impact of stricter regulation on banks. A third concerns expectations regarding banks’ obligations to the community.
Mr. Kearns highlighted that today, the rapid pace of technological change is having a significant influence on the banking sector: “We are currently seeing a massive increase in the availability of data and the ability to process it. »
He believes this could erode, or even eliminate, banks’ historical advantage in assessing credit risk.
“There are two parts to this: regulatory changes mean that banks’ private customer data can be made available to third parties and, secondly, that non-banks have some useful data for banking activities,” he said. he declared.
With the advent of the Consumer Data Right (CDR) and open banking, customers will soon have the ability to share their account data with other institutions, including non-banks. Using this data, a non-bank company could, for example, suggest accounts or cards better suited to a customer’s needs or use this information for a detailed credit assessment. In addition, Comprehensive Credit Reporting (CCR) will provide (bank and) non-bank lenders with more information about the credit history of potential borrowers.
Mr. Kearns pointed out that non-bank data is becoming increasingly valuable to “banking” services.
“Much of this data is collected by “big tech companies” such as Google, Apple and Facebook. For example, PayPal and Amazon have substantial sales data from their merchant customers, while social media interactions can be used to predict borrowers’ commitment to repaying their loans,” he explained.
“Technology companies for which data collection and analysis is in their DNA represent a new type of competitor for banks that have historically struggled to take full advantage of the private data they hold. How each bank responds to technological challenges will undoubtedly influence their relative success.
