Borrow
Banks risk ‘becoming footnotes to history’
The world’s largest banks appear unprepared for an economic downturn, lagging on both technology and scale, according to new research.
Banks risk ‘becoming footnotes to history’
The world’s largest banks appear unprepared for an economic downturn, lagging on both technology and scale, according to new research.
A new report from global consultancy firm McKinsey and Co said banks have been warned that they risk “becoming footnotes to history” if they do not scale up and embrace technology.
“About 35 per cent of banks globally are both subscale and suffer from operating in unfavourable markets,” the report stated.
“Their business models are flawed – needing a radical rethink – and the sense of urgency is particularly acute given their weak earnings and capital position,” it further outlined.
The consultancy firm said banks need to merge with more companies or acquire them, and forge new partnerships in order to build scale and weather the potential of financial storms.
“To that end, exploring opportunities to merge with banks in a similar position would be the shortest path to achieving that goal.”
The report also considered that banks need to be prepared for an “arms race on technology”.
“Both banks and fintechs today spend approximately 7 per cent of their revenues on IT, but while fintechs devote more than 70 percent of their budget to launching and scaling up innovative solutions, banks end up spending just 35 percent of their budget on innovation, with the rest spent on legacy architecture,” it outlined.
Noting the decade since the global financial crisis has brought with it a wave of innovation in financial services – bringing new competition from tech giants including Apple and Alphabet – the report highlighted how the banks are still pondering whether they should compete with, partner or acquire some of the newcomers.
Finally, the consultancy warned of the potential impact of a downturn on public perception of the banks.
“Because of the special role they play in society, they, perhaps more than other industries, benefit from society in areas such as deposit protection and regulation as a means of constraining supply.”
In return, the report indicated banks as “particularly accountable in an era of rising inequality and falling faith in historically trusted institutions, beyond shareholders to society and the sustainability of the environment in which they and their clients operate”.
About the author
About the author
Banking
Westpac hit with biggest fine in corporate history
Australian banking and financial services giant Westpac has reached an agreement with AUSTRAC to pay $1.3 billion for breaching anti-money laundering and counter-terrorism financing laws. ...Read more
Banking
6 ways to know you need a new bank
Unhappy with your current bank? Here’s how to know if you need to make a change. ...Read more
Banking
The banks beating the big 4 when it comes to customer satisfaction
Midsize banks are the biggest winners in a new survey of bank customer satisfaction. ...Read more
Banking
‘There’s no shame in deferring payments’
Deferring mortgage repayments is “a lesser evil” than having to sell property in the current market if you can hold off, a mortgage broker has advised. ...Read more
Banking
Standing on the shoulder of giants: How Australia’s fintechs can tap into open source
Australia has developed a vibrant fintech scene, which, in one year alone, grew by a staggering 37 per cent. The surge has ushered in a new era of financial products and services, from fully online ho...Read more
Banking
Billion-dollar bank blowout for fees for no service
To date, six of Australia’s largest financial institutions have reported a need to return more than $1 billion in compensation to customers who suffered as a result of fees for no service or non-com...Read more
Banking
Are bank branches becoming a thing of the past?
Banking may never be the same post-pandemic, with a new survey showing Australians have made some pretty drastic changes to the way they use and move money. ...Read more
Banking
Banks to extend COVID-19 loan deferrals beyond ‘September cliff’
Australia’s banks will now extend loan deferrals for another four months for customers who have been impacted by COVID-19 pandemic, as creditors try to avoid the September cliff. ...Read more
Banking
Westpac hit with biggest fine in corporate history
Australian banking and financial services giant Westpac has reached an agreement with AUSTRAC to pay $1.3 billion for breaching anti-money laundering and counter-terrorism financing laws. ...Read more
Banking
6 ways to know you need a new bank
Unhappy with your current bank? Here’s how to know if you need to make a change. ...Read more
Banking
The banks beating the big 4 when it comes to customer satisfaction
Midsize banks are the biggest winners in a new survey of bank customer satisfaction. ...Read more
Banking
‘There’s no shame in deferring payments’
Deferring mortgage repayments is “a lesser evil” than having to sell property in the current market if you can hold off, a mortgage broker has advised. ...Read more
Banking
Standing on the shoulder of giants: How Australia’s fintechs can tap into open source
Australia has developed a vibrant fintech scene, which, in one year alone, grew by a staggering 37 per cent. The surge has ushered in a new era of financial products and services, from fully online ho...Read more
Banking
Billion-dollar bank blowout for fees for no service
To date, six of Australia’s largest financial institutions have reported a need to return more than $1 billion in compensation to customers who suffered as a result of fees for no service or non-com...Read more
Banking
Are bank branches becoming a thing of the past?
Banking may never be the same post-pandemic, with a new survey showing Australians have made some pretty drastic changes to the way they use and move money. ...Read more
Banking
Banks to extend COVID-19 loan deferrals beyond ‘September cliff’
Australia’s banks will now extend loan deferrals for another four months for customers who have been impacted by COVID-19 pandemic, as creditors try to avoid the September cliff. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
