Research

Branching out

How financial institutions are banking on efficiency.

The banking landscape is preparing itself for a time of rapid change.

For many customers, the concept of physically attending a bank building to interact face-to-face with a human being for the purposes of conducting transactions is already largely redundant. For younger generations, or ‘digital natives’ it is a foreign practice altogether.

A global view gives an indication of what Australia can expect as the changes arrive on home shores. At the heart of the revolution is the increasing competition traditional banks are facing from new players, particularly in the digital banking sector.

There is less focus on bank branches, and a throng of consumers championing speed, technology and efficiency as the key determinants of how they select organisations best suited to manage their money.

Rather than bankers who remember a client’s name or systematically greet each customer with a practiced smile, great service is becoming a proxy for efficiency in a time-poor society.

More than two thirds of the global population will be living in a country that has a real time payment system by the end of 2018i.

Branchless banks continue to apply pressure on incumbents and the key challenge is to equal what they offer in the efficiency stakes. Consumers will increasingly demand that all businesses operate on par with digital banks and companies like Apple and Amazon. The battle for market share will revolve around the quest to deliver the most seamless and intuitive consumer experience.

Cutting edge mobile apps; seamless functionality of app interface (both front-end and back-end) and a highly efficient branch network will be the components of a winning strategy for banks in their fight to survive and thrive.

How are banks keeping up?

A global trend is emerging for less branch traffic, with a more streamlined model facilitated by a reduction in branch numbers, smaller square footage of branches, and staffing reductions.

Globally, there has also been a notable move toward real time P2P payments, leading to a reduction in cash movement expenses and cheque processing costs. Re-engineered back office processing has streamlined back end functions, while mechanisms such as eDelivery statements, mobile statements and mobile product offers have reduced expenses associated with printing and mail-outs.

However, according to Morgan Stanley Research, branches will not necessarily become obsolete in a digitised banking landscapeii.

For information in investment opportunities across the FinTech and banking sector, please contact your Morgan Stanley Financial Adviser.

  • Important Information

    All material on this website has been prepared by one or all of Morgan Stanley Australia Limited (ABN 67 003 734 576, AFSL 233742), Morgan Stanley Australia Securities Limited (ABN 55 078 652 276, AFSL 233741), a participant of the ASX Group and Chi-X Australia, Morgan Stanley Investment Management (Australia) Pty Limited (ABN 22 122 040 037, AFSL 314182) and/or Morgan Stanley Wealth Management Australia Pty Ltd. (ABN 19 009 145 555, AFSL 240813), a participant of the ASX Group (collectively “Morgan Stanley”), for informational purposes only and is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. Unless otherwise stated, the material was not prepared by the Morgan Stanley Research Department and is not a research report as defined under ASIC guidance.

    This communication provides market commentary and strategy ideas to clients of Morgan Stanley and its affiliates. Such commentary and ideas are based upon generally available information. Although the information has been obtained from sources believed to be reliable, we do not guarantee its accuracy, and such information may be incomplete or condensed. All opinions and estimates included in this document constitute our judgment as of this date and are subject to change without notice.

    The material on this website contains factual information only and is not intended to reflect any recommendations or financial advice, nor is it an offer or solicitation in relation to any particular financial product. To the extent this document does contain any general advice, it has been prepared without taking into account your objectives, financial situation or needs, and because of this, you should, before acting on it, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs, and if the advice relates to the acquisition of a particular financial product for which an offer document (such as a prospectus or product disclosure document) is available, you should obtain the offer document relating to the particular product and consider it before making any decision whether to acquire the product.