Crisis a chance for banks to refocus

Ms Bligh provided some context for the banks’ response to the pandemic crisis.

“Australian banks came into this pandemic against two very significant backdrops. The first is two years of global credential reform following the global financial crisis that has seen banks around the world build their credential strength, so banks in Australia came into COVID-19 stronger and better capitalised than they have ever been. This means they had the financial capability and confidence to act as shock absorbers when the shock hit the Australian economy,” she said.  

“Secondly, they came into this with the backdrop of a Royal Commission into Misconduct. This meant that they came into the crisis looking at it through the lens of community expectations and customer care.”

Ms Bligh illustrated this by pointing to the initiatives that banks have put in place to aid consumers, including the widely adopted six month loan payment deferral program.

Ms Bligh also discussed the way banks have made use of the data they have available to “assist and work with government and regulators to provide real time information, using large scale analysis to get real-time information about what banks are seeing on spending and particular industry sectors. This is an opportunity that government and treasury have not had in previous economic downturns,” she said.

Ms Bligh also highlighted the innovation in the sector during this period.

“One of the challenges in a crisis is not to drop everything while you deal with it. Banks have achieved some remarkable outcomes over the past three to four months but have at the same time been working to implement open banking. We have also seen significant changes through emergency powers, allowing customers to use electronic signatures and video conference witnessing of documents.”

While highlighting these developments, Ms Bligh also cautioned that “the crisis is not over, and the transition will pose some big challenges and opportunities.”

“There is no such thing as a crisis of this magnitude without some casualties on the other side. The focus of banks over the next six to 12 months will be focused on mitigating and minimising these casualties.

“There are lots of opportunities as well. Further acceleration of the digitisation of banking gives banks deeper and richer data they can use to identify where customers may be getting into financial difficult and be able to help them sooner rather than waiting till they fall of a financial cliff.

“Ultimately it all means that there is an opportunity for not only faster, better and cheaper services for customers, but also for new initiatives like open banking to provide entirely new services.”

KPMG Chair in Organisational Trust and University of Queensland Professor of Management, Nicole Gillespie, focused on the issue of trust in financial services.

“Decades of research shows that trust here has three key pillars – customers trust institutions like banks that demonstrate integrity, ability and humanity.

“Ability is around that competence to effectively and reliably meet goals and deliver goods and services. Integrity is around consistently adhering to common moral and ethical principals such as being honest, treating customers fairly, keeping promises and operating within the law. Humanity is about demonstrating care and concern for those affected by the organisations operations.”

“The Australian banking sector has often excelled at ability to their credit. In contrast, integrity and humanity has been challenged as seen in the Royal Commission and some opinion polls commissioned before the crisis began,” she said.

“Humanity is particularly important during the current crisis. People are very vulnerable in the current context. We are seeing this play out in customers going to their banks and seeking reassurance that they will be supported through this process.”

Ms Gillespie echoed Ms Bligh’s sentiments that the sector should see the crisis as an opportunity.

“The pandemic has given the sector a very strong platform to demonstrate its humanity and its societal purpose around helping Australia to recover economically. There is a real opportunity here to deeply restore trust,” she said.

“To their credit the banks have stepped up as Anna noted. However, research also shows that these trust gains can be quickly lost. What I see as the harder challenge going forward is for the sector to shore up and retain these trust gains as we head into the recovery.”

To do this, Ms Gillespie argues that banks will have to focus on factors including, “core values and long-term value creation, timely clear and responsive communication, and prioritising and taking care of the most vulnerable stakeholders.”

“These strategies are easy to talk about but what is much harder is consistently putting them into practice. To really seize this opportunity to restore trust, financial institutions will need to ensure that they are designed in a way that embeds and supports these strategies and integrity, ability and humanity.”