In a speech to the Thomson Reuters 4th Annual Australian Regulatory Summit in Sydney last week, Mr Medcraft said we are at an exciting time in history, when technological innovation is rewriting almost every industry, including financial services.
“Very recently, Max Levchin, PayPal co-founder and former chief technology officer, said that his new fintech start-up, Affirm – which offers flexible and fast loans and is pitched as an alternative to a credit card – could challenge global financial institutions with a new model designed to better align with customer interests,” he said.
“Regardless of whether this particular vision succeeds, it is evident that new disruptors will continue to challenge incumbents.”
The ASIC chairman pointed to a new Telstra report, Millennials, mobiles and money, which states that, “Millennials may be the first generation to live their lives never requiring nor engaging with a traditional institution and only ever associating the word ‘branch’ with a tree”.
Mr Medcraft said social licence, social media and the 24-hour news cycle are also changing customer expectations and the way customers behave.
“The Telstra report says that ‘the threat from fintech is significant’,” he said.
“It notes that two-thirds of Millennials prefer to receive advice on financial products and services via a digital platform, and that automated robo-advice or digital advice is perceived to be more independent and preferred.”
The topic of Mr Medcraft’s speech was culture and conduct. He noted that in an environment of digital disruption, building and maintaining a culture that your customer can believe in is imperative.
“There are more choices and information available to customers now than there has ever been before. Firms that do not have a good culture risk losing their customers to firms that do,” he said.
The Telstra found 90 per cent of bankers believe fintech innovators will have a big impact on traditional financial services. However, only 50 per cent think they are getting value from digital partnerships today.
The report also found 76 per cent of Millennials trust banks more than any other institution.
In 2015, Millennials became the number one source of global income, spending and wealth creation, according to the report.