PwC “certainly” sees digital disruption as a threat to superannuation in a new age of digital business.
Speaking on a panel at FEAL’s annual conference in Melbourne Chuck Lyman, partner at PWC, outlined how easy it has become to start a fintech, with the cost over the past five years dropping from $5 million to as little as $500, enabling a proliferation of new entrants to enter the industry.
It also allows new business to compete without having extensive presence in the market to lean on. Lyman said you don’t need to look much further than new entrant ING Direct to see how those with little history in Australia could do well.
“You can imagine a competitor leveraging some of the powerful technology today to roll your superannuation fund with digital access, the kind of thing Gen X and Y are demanding. You can imagine a formidable competitor coming on the scene and taking share at a fairly rapid rate.
“Personally, I haven’t seen it amount to much in terms of share of members, yet, but its on the horizon,” Lyman said.
Also on the panel was Rocky Scopelliti, global industry executive of banking, finance and insurance at Telstra Global Enterprise Services, who said that based on his research over the past 10 years all the contemporary conversation could be brought back to three areas: demographic change, mobility and personalisation.
The demographic change – Generation X and Y now make up half of the population – explains the demand of all of the disruption being seen on the supply side.
“We are now dealing with two generational groups that are the pioneers of the digital era as we understand it today. These were the generations that first saw music become portable. These are the generations that saw programming become recordable.
“They dominate the workforce and these are the generations that are fuelling the powerhouse of our super system. How they think, what they want and what they expect is absolutely the focal point of where our thinking needs to go.”
He added that mobility has changed the game, with 2014 being the first year mobiles became the primary device on which people access financial services in all of its forms – a fact true across 18 of the 22 countries he had researched.
The third area enabled by digital disruption – personalisation – is shifting the way companies think about customers, from masses to customers of one.
“My latest research shows an institution’s performance can now be measured by the extent it is attractive to Gen X and Y, and the extent to which it is digitally engaging those two groups.
“The single most important question confronting the industry is ‘Why do I need a bank or a superannuation provider?’, and that is a question being asked by many demographic groups. A third of Gen Y believes in the next five years there not going to need a bank.
“One in two believe innovation is coming from your Googles, Amazons and fintechs. Two out of three of them are more excited about receiving financial services from those kinds of organisations than the traditional providers of service. This means you are dealing with consumers who are looking outside.”
Katherine Milesi, partner at Deloitte, said we are at the second bend of human history, driven by the exponential growth in technology. The first was the industrial revolution which saw the population go from half a billion to over seven billion in 240 years.
She said this bend is it is about computational power as it increasingly becomes stronger, cheaper and smaller.
“What this means is, not in the next 240 years, but in the next 20 to 30 years we are going to be living in a world so different from today it will be so strange for those who come from this era. By 2030 our smartphones will be smarter than us. They will have the computational power of the human brain.”
She added this increase in computational power means data and analytics will likely impact super funds the most.
“Where you are most vulnerable is SG. Who is going to take your SG away? The banks. What are they doing? They have a relationship with their customers and are putting together a picture of the person which they can use to personalise the communication to them,” Milesi said.
To combat this, she gave three suggestions:
- Bringing information sources to educate the fund, particularly those on the board. One of the easiest source is a funds staff who will likely know a lot of what is going on.
- Having defences ready, particularly for the next couple of years. This includes tech that services members better than banks and better than disruptors.
- Thinking about how the organisation will need to change over time. Asking the question, ‘If tech is changing and expectations are changing how will the organisation need to change?’