RBNZ Bulletin looks at digital disruption in banking
An article published today in the Reserve Bank Bulletin explores the potential effects of digital disruption to banks and broader financial system stability.
Rapidly changing technology now allows consumers to conduct more of their day-to-day business online - and the current wave of digitisation is driving considerable change in the banking sector too. Consumers now expect more accessible, convenient and smarter transactions across a range of devices when accessing and managing their finances.
As the banking industry strives to meet consumers’ expectations for seamless digital banking services, new digital competitors are driving banks to respond with digital strategies that include modernising their core banking systems.
The article finds that digital disruption may ultimately benefit the soundness of the financial system by reducing systemic risks from individual institutions. However, in the medium term digital disruption may introduce new risks to the banking system if unregulated entities provide a significant portion of banking services and if existing banks no longer have large profitability buffers.
The Reserve Bank does not consider any new regulations are required in response to the digital disruption of the banking industry, but will continue to monitor new developments and assess whether a regulatory response may be required to maintain financial system soundness.
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