You don’t need a crystal ball to see the financial sector is rapidly changing but you may be able to take advantage of those changes and position yourself for success, People’s Choice Credit Union spokesperson Stuart Symons says.
“Technology and regulation are not only having a huge impact on the financial sector, they are also opening new ways to meet the needs of customers. Being aware of these changes could make your life much easier in 2019,” Mr Symons said.
1. Your financial information will start working harder for you
“We live in an age where our actions produce significant volumes of data, and that’s no different in the financial sector,” Mr Symons said.
“From July 1, the major banks will have to make available to you data relating to your credit and debit cards and transaction accounts and transactions, with the rest of the industry part of a staged introduction that will see mortgage data made available in February 2020.
“You will be able to authorise others to receive this information – and that’s where the power can truly make your data work for you. Imagine being able to use live information to help with budgeting, better understanding your spending habits and being able to compare credit cards, telephone plans and energy deals.
“Changing banks alone will be made easier because your data will be yours. Open Banking will start in 2019 – and should give rise to new tools, deals and practices that will make your banking smarter and easier.”
Mr Symons said Open Banking would make it easier for consumers to get hold of their own information – and therefore jump the hurdle that can make it difficult for consumers to switch products or providers.
The move to Comprehensive Credit Reporting in 2019 will also see broader use of positive payment histories – not just their credit failures, Mr Symons said.
“Financial institutions will be advising credit reporting agencies of good payment histories, not just defaults. This will ultimately result in those with good credit histories being rewarded with lower rates and better deals,” Mr Symons said.
“The challenge will be for younger customers to build good payment practices early. A missed payment on a phone bill can still hurt, but from this year, their 11 on-time payments will also count.”
2. Closer scrutiny – and the opportunities
“Industry regulators have highlighted concerns about rising household debt and put in place measures to cool the growth of investor lending. There’s also an industry-wide push for a greater focus on accurately assessing income and expenses to ensure any debt is affordable, serviceable and sustainable for the borrower – something we have long advocated for,” Mr Symons said.
“This may come as a surprise for those used to ready lending for highly-geared properties, but we are seeing a move to a more realistic understanding of what people can afford to borrow and repay.
“This opens the door to opportunity: being able to show you have complete control of your finances and being able to produce a clear and reasonable investment plan showing how you aim to meet long and short-term investment goals will give lenders confidence in your ability to service a loan. Where lenders are looking to price for risk, those who have greater control over their finances will receive better deals with cheaper rates.”
3. Real time payments gain more grunt
“This year’s introduction of the New Payment Platform gave customers the ability to transfer funds within a minute – a change that is just as significant as shifting from dial-up internet to broadband,” Mr Symons said.
“But the NPP is the entire infrastructure, which is likely to disrupt not just the financial sector, but many businesses. In 2019 we can expect to see the first signs of how the NPP will infiltrate property auctions, property sales and the exchange of large contracts. It won’t be limited to funds – we’re now going to see secure information attached to those funds.
“Many larger banks still aren’t offering full functionality of the NPP, but customers can use their email address or mobile number to secure their PayID now. It’s a small investment of time that will bear fruit in coming years.”
4. Digital banking raises its voice
“If you’re already asking Siri, Alexa and Google Home to help with lighting, heating and music, then you may just be warming up for the main act – inviting them to manage your personal finances,” Mr Symons said.
“The technical ability currently exists for these services to pay your utility bills, loans and phone account, even to order your favourite pizza with an approved payment. The main hurdle is security, and rightly so. Financial institutions need to be happy that their customer information is protected before they open the gates to this functionality.
“If you can see yourself using these features as they become available in the future, perhaps now is a good time to start experimenting with the non-financial possibilities. Investments are already being made in innovations to make digital banking faster, easier and more mobile. As we enter a year with Open Banking, we fully expect this trend to accelerate.”
5. Simplified product offerings
“Five years ago people were turning to reverse mortgages, margin lending and personal credit to finance their lifestyles. On the other side, large financial institutions were using multiple brands to offer similar or slightly differentiated products to attract different customers – a practice that the Productivity Commission noted had actually reduced the level of competition,” Mr Symons said.
“The current level of scrutiny is likely to push back against these offerings, with the first signs of change appearing this year.
“This simplification is likely to benefit customers with ready access to better rates and services. It will reward those customers who are ready to look beyond the major banks for their essential banking needs.”
6. Customers gaining more power – with all the benefits
“We fully expect to see regulatory reforms delivering greater transparency around interest rates and credit cards, the rise of more ‘digital only’ alternatives, and technology and reforms enabling customers to shop around for the best deals,” Mr Symons said.
“There is likely to be a more customer-centric focus adopted by financial institutions in the year ahead, similar to the focus offered by member-owned institutions like People’s Choice,” he said.
“We have the changing demographics and social needs of consumers, tougher regulations expected and financial institutions continuing to work hard to win back lost trust and re-establish relationships with dissatisfied customers.
“This is a win-win for customers who now hold the cards – first by asking their existing institution for their best deal, and second by looking to what the market will offer them.”
Learn more about People's Choice Mobile Banking here.