Two of Australia’s biggest banks named global tech giants Google and Apple as the biggest threat in the future of the banking industry.
The heads for Westpac and the National Australia Bank (NAB) attended a business lunch in Sydney this week and stated that financial institutions are now recognizing the threat these multinational IT platform providers are bringing to the financial industry. NAB chairman Ken Henry highlighted that their biggest competition nowadays does not arise from other financial institutions.
What they believe poses the biggest challenge is the rise of IT giants like Apple and Google and their entry into the financial segment. Westpac chairman Lindsay Maxsted was in agreement with Henry and noted that his biggest competition would come from outside the industry. In response to these foreseen threats, Westpac is already making changes in its hiring decisions and investments. Maxsted said the company is starting to put more money into financial technology.
There is merit to the pressure NAB and Westpac are facing. In March, some of the major Australian banks came together to fight off Apple Pay. National Australia Bank, Bendigo and Adelaide Bank, Commonwealth Bank of Australia and Westpac Banking Corp had collectively appealed to the Australian Competition and Consumer Commission (ACCC) to receive approval to get their digital wallets on the Apple store. This came in response to Apple Pay’s exclusive digital wallet gaining strength in the market.
The banks lost the battle against Apple and ACCC ruled that the detriments that will arise from the controller authorization will outweigh the benefits. Westpac and NAB’s sentiments regarding the perceived threats from these IT giants highlight the frustration of the two banks in terms of the focus of public debates and royal commissions. According to them, there has been too much focus on past misconducts, which includes issues on mortgage interest rates and allegations of interest-rate rigging.
According to Henry, there is currently very poor public understanding of mortgage interest rates. Restrictions from Australian regulators have pushed the banks to increase rates for their investors and customers.
In a statement, Henry said
We do need to have regulators out there explaining why they are taking the regulatory action they are taking, and they also could do us all a favour … by explaining that they do expect these things to have an impact on borrowing rates
NAB and Westpac were also caught recently in cases tied to profiteering from the rate hikes. Last month, NAB settled fines with the Australian Securities and Investments Commission (ASIC) while Westpac is still battling it out in court.