Banks need more Internet savvy
New Zealand financial institutions risk being overtaken by their global counterparts if they don't exploit the full potential of the Internet, says KPMG in its latest annual financial survey.
Tuesday, May 2nd 2000, 12:00AM
by Philip Macalister
New Zealand financial institutions risk being overtaken by their global counterparts if they don't exploit the full potential of the Internet. That's because consumer loyalty has lessened as alternatives are only a click away.
The comments come from Andrew Dinsdale, Chairman of KPMG's Banking and Finance Group, as KPMG released its 14th annual Financial Institutions Performance Survey yesterday (Tuesday).
Dinsdale said that New Zealand banks could expect to continue their strong performance throughout 2000, following last year's record profitability. However, he said that, with the notable exception of ASB Bank, local financial institutions were two to three years behind their international counterparts in their online services.
"More than 50 per cent of New Zealanders have access to the Internet and currently 34 per cent use it on a regular basis," Dinsdale said.
"The emergence of 'knowledge consumers' has shifted the power in relationships from the supplier to the buyer.
"No one knows what New Zealand's online financial services landscape will look like in the coming few years, but what we do know is that the centre stage is currently vacant. A New Zealand organisation has an opportunity to take the high ground and establish themselves as the destination site for online financial services."
The KPMG survey found that:
- Registered banks improved their underlying performance by 10 per cent to $2.24 billion in the year to December 1999, while their total assets grew 8 per cent to $160 billion.
- However, interest margins were squeezed. The weighted average interest rate margin for 1999 was 2.45 per cent, the lowest since the survey started tracking margins and that means interest margins have now been falling for the past four years (for more on margins, see our mortgage news page).
The survey's usual ranking of financial institutions, which is based on performance and profitability measures, put BNZ first followed by WestpacTrust and ANZ. However, Dinsdale said the gap between the three banks was relatively minor.
He said that whether financial institutions continued to perform strongly would depend on how they tackled the following industry-wide issues:
- Financial services specialists have successfully eroded market share in mortgages and investment products from the traditional players;
- Retaining top profit customers has become more elusive, while the least profitable customers continue to erode overall portfolio value;
- Contact with customers has most likely deteriorated in quality, thanks to cost-cutting and a proliferation of services channels; and
- Capturing the "trapped value" of a customer base has proven difficult because of organisational, technological and cultural barriers.