Australia’s banks have had things easy for a long time, but, writes Brian Caplen, this may not continue.

A Royal Commission looking into the Austrailian banking sector says in its interim report that the country's lenders were motivated by greed and regulators failed to call out misconduct. It adds that this is reason enough for a shake up. But on top of that, Australia is moving on quickly with instant payments, to be followed by open banking in 2019.

ANZ chief executive Shayne Elliott admitted at the opening plenary of Sibos in Sydney that the concept of “just turning up and being a bank” was no longer viable. The cost of complexity in the universal banking model had made it less attractive. “We think that the way ahead for ANZ is to do a few things well,” he said.

But defining exactly where to specialise for Australia’s big four banks is far from obvious. A vibrant fintech sector is busy working on all kinds of attractive solutions for customers, and new challengers include digital bank Volt, SME lender Judo Capital and Xinja, a bank designed to work entirely from mobile phones.

Temenos managing director for Asia-Pacific Martin Frick said: “Open banking will put a huge pressure on [incumbent] banks' IT infrastructures.” The banks’ spaghetti architecture makes the transition to open banking difficult, he added. The best approach is to pick one niche, install a software stack for that and see how things go, said Mr Frick.

Open banking combined with the recommendations made by the Royal Commission report may not break the dominance of the big four banks in Australia – which have 85% of the market – but it is going to force them to make changes.

Brian Caplen is the editor of The Banker. Follow him on Twitter @BrianCaplen

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