Leadership Perspectives: From a Management Perspective, Leadership Is the Key Challenge Going Forward. to Remain Successful, Organisations Must Continue to Encourage Leadership Both from an Industry Perspective and from Individuals within the Organisation. This Means Having the Courage to Change Business Environments in the Face of Criticism and Uncertainty
Mansfield, Bruce, Journal of Banking and Financial Services
Over the past decade, there have been many examples of organisations changing the competitive landscape in their respective industries and the financial services sector has been no exception.
Within the financial services sector there are three areas that illustrate this sort of dramatic change: home loans, deposits and credit cards.
Fifteen years ago, the home loan market was serviced primarily by banks and building societies. Variable rate home loans were standard and customers had to visit a branch manager to request a home loan. Competition existed in the industry, however, margins were healthy and customer churn was low.
Mortgage broking and originating was not common in Australia. While it had already become established in the United States, there was not much on offer locally in terms of fixed rate mortgages. Fortunately, a number of leaders had the vision and courage to bring these concepts into the Australian market--two well-known examples are Aussie Home Loans and Mortgage Choice.
In both instances, their foray into home loans was met with considerable resistance and scepticism. The banks resisted this change, generally challenging the sustainability of these new business models. After some time and further changes in market share, the industry passed through a tipping point and it responded by embracing the change. The rest is history and third-party mortgage brokers are now an established part of the landscape.
It is important to remember that the idea of mortgage broking was not new or revolutionary--it was a successful idea imported from another country. But despite challenges from established players, certain individuals had the enthusiasm to develop and promote the concept until it became widely accepted within the market. This is a good indicator that competition comes from within an industry, not from intervention by a regulator, something that is often lost in the current environment.
A similar pattern of change has occurred in the deposit landscape. Again, it is an established market that has witnessed the introduction of a number of new, high-yield deposit products serviced through alternative distribution channels.
We are at the early stages of a significant shift in this market segment, after a number of years with several players successfully leveraging a hybrid distribution model. The tipping point in this segment has been passed and the established players are now reacting to the changing market.
This example also highlights how a number of organisations took leadership roles--they challenged the status quo, imported best-practice approaches from other markets around the globe and stood firm in the face of criticism from within their industry--to become ultimately successful.
The payments business is no different from these examples and I believe that over the past 15 years, Visa and its members have also played a leadership role in Australia.
The credit card business was a traditional, stable part of retail banking during the 1990s. At this time, credit cards were similar to home loans, simple, well priced, convenient and delivered to consumers in one form, the classic card.
However, after extensive research worldwide, Visa identified some interesting trends in the marketplace. The US cards industry was forming alliances with telecommunications and airline partners while the UK cards market was introducing annual fees and aligning with supermarkets, petrol stations and department stores. This research highlighted the emergence of programs designed to reward cardholders for their spending through various forms: discounts, frequent flyer points and exclusive benefits aligned to cardholder spend.
A number of key players within the cards industry had the courage to develop the concept of a Visa card in cooperation with Telstra and Qantas and the rest is now history. …