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Disruption or distraction? How digitisation is changing New Zealand banks and core banking systems

Amber Wadsworth

Consumers now expect the same seamless digital services from banks as they receive from other industries. Hence, the banking industry is being ‘digitally disrupted’ as banks and technology firms race to meet this expectation. This article explores whether the digital disruption of banking is a ‘disruption’ or more of a ‘distraction’ and aims to understand the concept of digital disruption of banking, what is driving it, what are the impacts on banks, and what are the impacts on financial system stability. It finds that the disruption is occurring in all areas of banking but particularly in retail customer interactions. The introduction of new ‘digital’ competitors is driving banks to respond with digital strategies including the modernisation of their core banking systems. Digital disruption may impact financial stability both positively and negatively, and the Reserve Bank continues to monitor it closely.