Speaking at a business forum at the 32nd Australasian Finance and Banking Conference in Sydney in December, Jonathan Kearns said there are several issues facing banks that could potentially lead to even greater change in coming years.

The first is the general increased access to, and ability to process, vast quantities of data.

“This is facilitating the emergence of new, technology-driven competitors to banks which could potentially impact their dominant position in the financial system,” the RBA’s head of financial stability said.

“A second is the impact of tighter regulation on banks. A third is expectations for banks’ obligations to the community.

Mr Kearns noted that a substantial influence on banking at the moment is the rapid pace of technological change: “We are currently seeing a massive increase in the availability of, and ability to process, data.”

He believes that this could erode, or maybe even eradicate, banks’ historical advantage in credit risk assessment.

“There are two parts to this: regulatory changes mean that banks’ private customer data can be made available to others and, second, that non-banks have some data that is useful for banking business,” he said.

With the advent of the consumer data right (CDR) and open banking, customers will soon have the ability to share their account data with other institutions, including non-banks. Using these data, a non-bank could, for example, suggest accounts or cards that better suit a customer’s needs or use the information for detailed credit assessment. In addition, Comprehensive Credit Reporting (CCR) will provide (bank and) non-bank lenders with greater information about potential borrowers’ credit history.

Mr Kearns highlighted that non-banks' data that are becoming more valuable for “banking” services.

“Much of this data is collected by ‘big tech’ firms such as Google, Apple and Facebook. For example, PayPal and Amazon have substantial data on the sales of their merchant customers, while social networking interactions can be used to predict borrowers’ commitment to repay their loans,” he explained.

“Technology firms for which collecting and analysing data is in their DNA are a new type of competitor for banks that have historically struggled to take full advantage of the private data they hold. How well individual banks respond to technology challenges will no doubt influence their relative success.”