The way banks operate will change dramatically over the next five years, according to Kina Group’s CEO, Syd Yates. Banks will need to become quasi-technology companies.

Kina Group’s Syd Yates.

It is 15 months since Kina Securities Limited Group was listed, and a year since the company undertook a major rebranding. CEO Yates says ‘it’s been everything that we expected it to be.’

In July, 2015, Kina Group became PNG’s fourth retail rank, when it took over the Malaysian-owned Maybank (PNG), and subsequently floated on the ASX and POMSoX.

‘Maybank PNG was identified as an attractive acquisition for Kina due to its established branch network, conservative capital structure, and client base, which offers exposure to PNG’s growing middle class, small-to-medium enterprise sector and high net worth individuals,’ Yates told Business Advantage PNG at the time of the acquisition.

‘ I think the traditional bank branch will transform into something different.’

Since then, he says, there has been ‘a tremendous response from the public in Papua New Guinea and also from our customers.’

‘We’ve spent a lot of time completing the integration with Maybank’s systems, and dealing with new customers.’

Game changer

Yates says over the next 12 months he intends to open two more branches and hopes to link with the other commercial banks (BSP, Westpac and the ANZ) with ATMs and EFTPOS machines.

Kina Securities’ (Kina Group’s) share price over the last year. Source: Google Finance

‘That will be a game changer for us. That will allow our customers to be able to access ATMs and EFTPOS machines anywhere in the country, which will be a great benefit for our customers.’

‘Our customers need to be able to connect with us any time, anyhow and anywhere.’

Yates says the company will be introducing more consumer and business banking products and is moving towards offering a full banking service. What that means, however, is expected to change.

‘The way we’ve been doing banking in the world will change dramatically over the next five years. I think the traditional bank branch will transform into something different.

‘I’m not sure how many ATMs will be around, for example. EFTPOS machines probably won’t have great growth. Mobile technology will probably be where it already sits, and we need to think about digital online. So our customers need to be able to connect with us any time, anyhow and anywhere.

‘You need to put the control back to the customer to let them choose what they want to do. We should be a vehicle for letting that happen and to help them do what they want when they want it.’

Technological change

All the banks, including the legacy banks, says Yates, will need to become quasi-technology companies. The Kina Securities’ board is about to appoint its first technology director.

Yates says Google’s Android Pay is ‘probably’ one online banking product that would work well in PNG, where Android phones dominate the mobile market. He considers it a threat to traditional banking.

‘We’ve grown our banking business, we’ve grown our wealth business, and what we’ve got is a good platform for 2017 and beyond.’

Parts of Africa now use MPESA, a mobile phone-based money transfer, financing and microfinancing service, launched in 2007 by Vodafone in Kenya and Tanzania. Yates says it now operates in Afghanistan, South Africa, India, Romania and Albania. The product allows users to deposit, withdraw, transfer money and pay for goods and services with a mobile device.

The world, he says, is moving towards a cashless society, although the transition may take longer in PNG.

Growth

Yates says ‘a major achievement in the last 12 months’ has been to win, in a competitive tender, the member administration services account of Nasfund, one of PNG’s two major superannuation funds..

‘This dramatically grows the administration division within our Wealth business and places Kina at number three in Australia for third-party fund administration.

‘We’ve grown our banking business, we’ve grown our wealth business, and what we’ve got is a good platform for 2017 and beyond.

‘Yates believes it will be 12-18 months before the economy rebounds.’

‘We want a solid foundation so that when the economy improves we will have a strong platform off which to further grow the business. Generally it’s fairly conservative for what we are trying to achieve. We’re naturally conservative investors, so we’re probably on the cautious side.

‘And while you don’t always get the greatest returns, you don’t always have the worst losses either.’

Yates believes it will be 12 to 18 months before the economy rebounds. Then, he expects more major mining projects to ramp up.

Commenting on the 2017 budget, he agrees that the government faces the dilemma of trying to balance their budget, by raising revenue at a time when there is an actual revenue shortfall. He says that is why it has been necessary to cut expenditures. This means it will continue to be a tough economy, but the intent of the budget announcements he regards as ‘positive’.