Once trust was assumed, now it must be earned. According to a 2018 survey only one in three people in Australia trust the banking industry- and this was before the Banking Royal Commission commenced. Also, an Ernst and Young survey from 2016 indicates that new entrants and Fintechs have achieved parity with traditional banks when it comes to trust.
This article originally appeared on Financial Times on 1/5/2018.
AMP was founded 170 years ago on the principle of providing sound advice. But revelations at a royal commission that the Australian financial services firm ripped off customers and lied to regulators have savaged its reputation and shaken one of the world’s most profitable banking sectors to its core.
Now the company is in the middle of a political maelstrom causing Craig Meller, its chief executive, to quit following evidence that AMP misled regulators on at least 20 occasions and systematically charged customers fees for no service.
“AMP’s heritage brand has been trashed and the immediate future is dark, to say the least,” said David Ellis, analyst at Morningstar.
The inquiry is particularly sensitive as it involves Australia’s four biggest banks, which control three-quarters of the domestic market, affecting services that most of its citizens use every day. Regulators recently began targeting a culture of rule-breaking, with cases focusing on issues from the rigging of interest rates to allegations of facilitating money laundering.
The probe also comes amid global outrage over banks’ bad behaviour. Wells Fargo was recently fined $1bn in the wake of a US investigation, which found thousands of staff signed up customers for services they knew nothing about to meet sales targets. While in the UK, banks have repaid £30bn to customers mis-sold payment protection insurance linked to mortgages and credit cards since 2011.
Critics say Australia’s highly concentrated bank sector encourages institutions to take customers for granted. That has prompted calls for a review of the country’s “four pillars” policy rejecting any merger or acquisition of the four biggest banks, which they say has shielded Commonwealth Bank of Australia, National Australia Bank, Westpac and ANZ from competition.