The man in charge of the government’s financial system inquiry, David Murray, has warned that accommodating technological advancements that lift productivity and drive competition will prove a key future challenge.
New innovation, particularly in the payments system, is disrupting the banking sector with emerging payment providers like PayPal and Google now competing with traditional institutions.
In an interview with the Australian Financial Review, Mr Murray said striking the right regulatory balance that provided both ongoing stability as well as the flexibility to accommodate emerging technologies would prove critical.
His comments come as a leading expert on digital strategies and innovation urged the big four banks, (NAB, CBA, ANZ, Westpac), to renovate their business models and collaborate with start-ups targeting the payment space.
Ernst & Young digital strategy leader, David Jensen, told The Australian that the advantage for traditional banks was to harness the creativity and so-called “nimbleness” of start-ups that were challenging the status-quo.
“Collaboration is the key to being successful in building your digital future. I mean more than just having good relationships and suppliers. In the case of start-ups that have less friction, more nimbleness to challenge the status quo,” Mr Jensen said. “And there are established brands that have marketing might and deep pockets in terms of marketing spend. There is a great combination there potentially if you get it right.”
Mr Murray is reportedly leaning towards recommending a more flexible regulatory environment that will be able to accommodate the emergence of new technologies.
“We are trying to weigh up how you have a regulatory structure that can adapt without having to stop and start every time there is a major shift,” he told the AFR. “Or do you take a very firm stance, particularly on the payments system and maybe make it harder to get some of the benefits from the technology?”
Mr Murray is the former chairman of the Future Fund and former chief executive of the Commonwealth Bank of Australia. He is currently heading up the government’s financial system inquiry. An interim report was released last month.