The new era in financial services. Culture. Innovation. Regulation.

1. The new era in
financial services
Culture. Innovation.
Regulation.
Financial Review Banking & Wealth Summit Playback

2. We are pleased to share a playful articulation of the
conversation that took place at the Financial Review
Banking & Wealth Summit 2016, which captures the key
themes through media coverage and Deloitte illustrations.
Over two days regulators,
financial institutions,
government and innovators
candidly exchanged ideas,
stimulating debate on the
tensions between stability and
innovation, customer trust and
corporate culture, and turning
challenges into opportunities.

3. Deloitte CEO, Cindy Hook, set the scene
for the 300+ delegates: “Our task is to find
the right balance to operate within good
governance structures, as well as challenge
the status quo where necessary, to enable
innovation to deliver superior customer
service and customer experience.”
Getting the right balance, building bridges
and brave leadership were clear calls to
action over the two days. William (Bill)
Coen, Secretary General, Basel Committee
on Banking Supervision, made the Sydney
Harbour Bridge a recurring metaphor
throughout the conference. He outlined
the importance of safe and sound support
similar to the Basel banking framework,
he also pointed out that Basel, like the
Harbour Bridge, requires regular maintenance
and constant vigilance as well as stability and
certainty. Hence the need to bed down this
year’s Basel III capital requirements.
Regulators, banks, wealth managers, government
and innovators all agreed, good governance,
culture and ethics is the only way to ensure
customers’ best interests. Re-building customer
trust and committing to open-ethical practices
cannot be imposed because ‘culture drives
conduct’ and effectively managing compliance
and conduct risk is not the same as having a
healthy organisational culture. Just like slowing
down while passing stationary speed cameras,
is not the same thing as safe driving:
NAB Chairman Dr Ken Henry.
Financial Services Inquiry Chair David Murray
took the bridge analogy further reminding us
that before the Sydney Harbour Bridge was
opened the NSW Government defaulted on
its debt due to a global financial crisis. He also
told the story of the bridge’s pylons which
are purely cosmetic. Their purpose is ‘to look
strong’ to ensure ‘trust and confidence’ in
the community – critical requirements for
the financialservices industry that need to
be carefully and purposefully protected.
From complacency to paranoia to
opportunism, fintech partnerships
will accelerate the pace of innovation.
Jesse McWaters, Financial Innovation Lead at
the World Economic Forum, said the complacency
to paranoia trajectory from 2014 has now shifted
from exciting CEOs to the possibilities of fintech
partnerships, and how they might enable them
to offer new services to their client to be more
efficient and innovative.
Australian fintechs have become increasingly
skilled at exploring innovation where significant
customer friction meets large pools of profit,
which was one of the key findings of the
Deloitte World Economic Forum Future of
Financial Services research. It is clear that the
transformative effect of the digital revolution
will only intensify the pace of innovation and
Greg Medcraft believes Australia can take
on the world and lead.
Australia should aspire to be a leader
in innovation.
Westpac Chief Information Officer Dave Curran
said technology is taking the industry down a
more open data access path. As we go down
that path, we must not lose the concept of trust
we have in banking. It is something we cannot
recreate later. Making a payment to buy a book
is one level of trust, entrusting my life savings
and personal identity is a very different level of
trust. In defence of being accused by fintechs
of not being more open with data, Curran
explained the difficulty of linking core banking
systems with other information. It is happening
but it has to be safe and secure. People expect
banking services to work every time and remain
cyber secure. Partnering with social media
companies, retailers, telcos and fintechs to
create the ‘hassle-free’ experience customers
want, is happening but we are doing so with
prudence and care.

4. CULTURE
Harrison Young, Director and Chairman of the Risk Committee, CBA
ON RISK CULTURE: MAKING FRIENDS WITH 220 DOT 13B
Risk culture is a form of wisdom. So is mastery of the Force. If the Force is the invisible glue that holds the universe
together, risk culture in banks is part of the magic that makes banking work. We have an obligation not to endanger
the financial system.

5. CULTURE
David Murray AO, Chair, Financial System Inquiry
HOW SHOULD AUSTRALIAN FINANCIAL SERVICES SERVE THE NATION?
If you spend your time looking for the next blow-up, there will be one. We want an innovative nation but a risk
adverse corporate nature doesn’t lend itself to that.

6. CULTURE
Dr Ken Henry AC, Chairman, NAB
THE FUTURE OF BANKING
A bank that truly puts the customer at the centre of everything it does should not need regulation. Australian banks
survived the stress testing of the global financial crisis in stronger shape than before. A continued focus is not a bad
thing. And on innovation: “Digitisation of P2P is new, peer to peer lending is old.”

7. CULTURE
Helen Rowell, Deputy Chairman, APRA
GOVERNANCE AND CULTURE IN SUPERANNUATION
The best interest of superannuation members has to be central to super trustees who must lead the culture. Having
too many people on the board hinders good decision making as does length of tenure. The longer a director sits on
a board the less likely their judgement will be independent.

8. CULTURE
John Lonsdale, Deputy Secretary, Markets Group, Treasury
IMPLEMENTING THE FSI AND INNOVATION AGENDA
Global economic risks are real and we would not be doing our job if we weren’t preparing for them. Australian
banks cannot be complacent. It is better to make the effort now while we are strong. Regulators have put culture
in the spotlight; it is the industry that needs to do something about it.

9. CULTURE
Greg Medcraft, Chairman, ASIC
REGULATING FOR THE FUTURE: INNOVATION, DISRUPTION AND CYBER-RESILIENCE
Culture is a key driver of conduct and purpose. Technology is just an enabler. None of it changes our fundamental
need for regulation. As innovators are more agile, regulators will need to ensure institutions sustain a customer-
focused culture. They have to behave for consumers to have confidence.

10. INNOVATION
Jesse McWaters, Financial Innovation Lead, World Economic Forum
WORLD ECONOMIC FORUM: FUTURE OF FINANCIAL SERVICES
Distributed ledger technologies, like blockchain, could dramatically reshape financial products and processes.
They could redraw the map of financial services; even be used to usher in the cashless society. But it is not yet
clear what will differentiate winners and losers. The questions to ask are whether incumbent institutions can rely
on regulators to help protect their core business; what building blocks are necessary for successful incumbent
and new entrant collaboration; and how to attract and nurture the talent to meet the challenges of tomorrow.

11. INNOVATION
Dilip Rao, Managing Director Asia Pacific, Ripple Labs
HOW WILL BLOCKCHAIN REVOLUTIONISE THE COMPETITIVE LANDSCAPE?
Technological transformation historically seems to take 10 years. When EFTPOS was introduced in 1989 there were
11,452 terminals, 10 years later there were 220,455. When BPAY began in 1997 with $0 it accelerated to exchange
$1bn by 2007. Blockchain’s transformation is well underway and in 2016 a cluster of banks will move real money
on it. It will require partnerships between fintechs and institutions, with cross-border payments as one of the best
use cases. The exciting prospect is the nature of the shift from the internet of ‘things’ to the internet of ‘value’.
Let us encourage 1000 networks to bloom!

12. INNOVATION
Jemma Enright, Co-Founder and CEO, MoneyBrilliant
Mark Hand, MD Corporate and Commercial Banking, ANZ
Mike Hirst, CEO, Bendigo and Adelaide Bank
Debbie Blakey, CEO, HESTA
Antony Cahill, Group Executive, Products & Markets, NAB
THE NEW ERA
Jemma Enright: The dynamics in a smaller organisation are different. Every person in the company comes in everyday
to innovate for the customer.
Mark Hand: I would get approached almost daily by a startup with an idea that is going to revolutionise my business.
Mike Hirst: Taking risks to get ahead of the wave means being dumped sometimes, but if they know why, customers
back you.

13. REGULATION
Wayne Byres, Chairman, APRA
SAFETY, SOUNDNESS AND RISK
We need the financial sector to take up the challenge to put in place better incentives for prudent behaviour. I think
when you look outward from Australia you can see risks in every direction you look. We are paid to be pessimists.

14. REGULATION
Professor Ian Harper, Chair, Competition Policy Review, and Partner, Deloitte Access Economics
PERSPECTIVES ON THE IMPORTANCE OF COMPETITION FOR INNOVATION AND EFFICIENCY IN FINANCIAL MARKETS
There is choice and competition in what we do. Consumers are the guiding principle of competition and choice.
The speed of change is fast and furious and it will continue to accelerate.

15. REGULATION
Bill Coen, Secretary-General, Basel Committee on Banking Supervision
THE GLOBAL REFORM AGENDA
The most important question about bank capital is whether it is adequate to ensure resilience. I react sharply when I
hear Basel rules are choking off credit to the real economy. That’s nonsense. Sick banks can’t lend. Banks that have
the confidence of their depositors, shareholders and regulators can lend.