Shaping the Australian banking system for a changing economy
15.03.2026 - 01:53
Mandala’s latest research, prepared for the Commonwealth Bank of Australia, finds that Australian banking has been transformed beyond recognition by technology, globalisation, and regulatory change. However, policy has not kept pace. Major banks now face a shrinking revenue base while providing a growing suite of collective goods including regional branches, ATM networks, and payment infrastructure, that comparable financial institutions are not required to provide. The report finds that declining profitability and an uneven regulatory playing field amid rising geopolitical uncertainty place Australia's financial resilience at risk. It recommends three principles for policymakers to shape Australia’s banking system to best serve our national interest. First, consider system-wide impacts of policy settings. Second, apply the same obligations to firms conducting the same activities with the same risk. Third, assess how overseas firms operating in critical parts of the financial system would behave in a crisis.
Banking has radically changed. Significant technological and geostrategic developments have changed the structure of the world economy.
Banking is unrecognisable from what it was just 20 years ago. About 70% of transactions were made using cash in 2007. Today, that figure is around 13%. The value of mobile wallet transactions increased from $7 billion in 2018-19 to $160 billion in 2024-25. The value of buy-now-pay-later payments increased from $3 billion in 2017-18 to $19 billion in 2022-23. The percentage of mortgages that originated with a broker increased from 52% in 2014 to 75% in 2024.
While banking has changed, the narrative around banking remains decades out of date. It is unsurprising, given the above global forces, that economic metrics show banking in Australia is more competitive than ever. Competition has increased over time.
Regulatory decisions risk unintended consequences for the banking system. Regulatory interventions that increase banking costs or reduce revenue constrain major banks' organic capital generation. So too do arbitrage opportunities that allow fintechs and non-bank providers to operate outside the regulatory perimeter, while major banks continue to provide both digital-first offerings and legacy services.
Our current trajectory undermines the resilience of the Australian economy. This path puts Australia’s financial resilience at risk, too. Bank profits build shareholder capital, and shareholder capital is what allows lending to occur.
A banking system that best serves Australia’s national interest is one that is resilient, fair, and efficient. Three guiding principles can help policymakers develop a strong banking system that serves our national interest. First, consider system-wide impacts of policy settings. Second, apply the same obligations to firms conducting the same activities with the same risk. Third, assess how overseas firms operating in critical parts of the financial system would behave in a crisis.
Read the full report here.
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Shaping the Australian banking system for a changing economy
Mandala’s latest research, prepared for the Commonwealth Bank of Australia, finds that Australian banking has been transformed beyond recognition by technology, globalisation, and regulatory change. However, policy has not kept pace. Major banks now face a shrinking revenue base while providing a growing suite of collective goods including regional branches, ATM networks, and payment infrastructure, that comparable financial institutions are not required to provide. The report finds that declining profitability and an uneven regulatory playing field amid rising geopolitical uncertainty place Australia's financial resilience at risk. It recommends three principles for policymakers to shape Australia’s banking system to best serve our national interest. First, consider system-wide impacts of policy settings. Second, apply the same obligations to firms conducting the same activities with the same risk. Third, assess how overseas firms operating in critical parts of the financial system would behave in a crisis.
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