Speech by AFSA Chief Executive Tim Beresford at the 2025 Future of Banking Summit on Friday 9 May.
*check against delivery*
Introduction
Good morning and thank you for inviting me to speak to you today.
I'd like to acknowledge the traditional custodians of the lands on which we meet today, the Gadigal people of the Eora nation, and pay my respects to their Elders past and present.
Thank you to FST Media for organising today's event and for your work over the past two decades helping Australia's digital leaders stay ahead of the technology curve.
I see you have some wide-ranging discussions today as you consider the future of banking.
My address will touch on a number of those topics.
I'm going to pan out to the global picture and look at 3 megatrends causing uncertainty in the world – geopolitical risk, technological innovation and disruption, and climate change.
I'll discuss how these megatrends are shaping Australia's banking sector and impacting consumer behaviours and lending practices.
And I'll suggest how we can respond to these challenges and opportunities – in two ways.
Firstly, we need to take a holistic system approach.
The interconnectedness of the global financial system and the pace at which things change – as we saw with the collapse of the Silicon Valley Bank – requires system thinking from all of us.
That means everyone here is a system operator. We all have a role to play in the system's health and the customer experience.
We can often overlook this, making decisions in isolation, without considering their potential wider impact.
And secondly, in an increasingly uncertain world, we must all work to build social licence – it goes to trust.
Now more than ever, the way you do business matters.
Lending practices must balance both social and economic outcomes. Innovation mustn't come at the cost of responsible lending.
There's a speech Lieutenant General David Morrison gave to Australian troops in 2013 that still resonates strongly today.
He said: "The standard you walk past is the standard you accept."
I'd ask you all to reflect on the standard you accept, the values you uphold, as you go about your day-to-day work.
Global megatrends
Geopolitical risk
As senior banking executives, you're operating in an increasingly fragmented global economy.
We're seeing a move away from multilateral trade agreements to ad-hoc bilateral arrangements and regional supply chains. From globalisation to slowbalisation.
This feeds into rising economic uncertainties. The risk of resurgent inflation and a sluggish economic recovery. A less optimistic outlook for the US and China. Not to mention the Black Sea and the Red Sea.
Little wonder that, in survey after survey, geopolitical risk comes out as the top concern of global business leaders and investors.
The impacts of this risk are very real.
Just two weeks ago, the IMF[1] cut its global growth forecast for this year by half a percentage point to 2.8%, citing increased tariffs and uncertainty.
It warns the global economic system of the past 80 years is being reset, ushering the world into a new era.
APRA Chair John Lonsdale spoke at length about geopolitical risk in recent speeches to the European Australian Business Council[2] and the AFR Banking Summit[3] .
He noted how international upheaval has increased operational risks in the domestic financial system.
So, what does this mean for you as leaders and managers in the Australian banking system?
The Lowy Institute[4] says Australian business leaders cannot afford to be passive observers to rising geopolitical risk.
Leaving it to government to manage these risks is no longer an option.
And it warns that markets, shareholders and stakeholders will punish firms that are caught unprepared for the calamities ahead.
We see regulators sharpening their understanding of how geopolitical shocks can impact the financial system.
APRA has created its first specialist geopolitical risk team.
APRA's first system-wide risk stress test will focus on links between the $4.2 trillion superannuation industry and the $5.5 trillion banking industry it will one day eclipse.
It will explore how the superannuation industry and fund decisions may dampen or amplify stress across the financial system.
These are important considerations, given the superannuation sector's large – and growing – share of financial system assets.
Technological innovation and disruption
Turning to the second megatrend, the rapid pace of technological change presents challenges and opportunities for businesses globally, including your own.
Cybersecurity poses a substantial risk to the global financial system.
As far back as February 2020, European Central Bank president Christine Legarde warned a cyberattack could trigger a serious financial crisis.
Since then, cyberattacks have almost doubled, according to the IMF[5] , with nearly one-fifth of all incidents affecting financial firms.
The growth of AI potentially elevates this threat, enabling more scalable attacks.
AI sits at an interesting nexus between innovation and risk.
On the innovation side, it's estimated generative AI could increase global banking industry revenues by up to 4.7% a year – or $340 billion[6] .
But on the risk side, trust in AI is divided. The 2025 Edelman Trust Barometer[7] found while 72% of people in China trust AI, in the US it's just 32% – and in Australia, 25%.
And while organisations globally are keen to harness AI, only 37% say they're equipped to assess the security of AI tools before deployment, according to the World Economic Forum[8] .
This has interesting implications for the Australian banking industry.
Australia has long been a financial services innovator, dating back to Paul Keating's 1983 decision to open the door to global banking competition.
That innovation continues today. Our fintech industry is ranked 6th in the world[9] and the number of companies in it has grown five-fold in five years.
Our community embraces digital technology.
Digital banking interactions now account for over 99% of all customer interactions[10] , and Australians are among the world's top users of cashless payments[11] .
So, some great opportunities for the financial sector to grow through technology innovation – but also some risks.
NAB says every bank is under cyber attack every minute of every day. Its fraud team takes 80,000 calls a month[12] .
It's a costly risk to manage. CBA alone spent more than $800 million[13] protecting against scams, fraud and cybercrime last financial year.
And while there are obvious gains for the local banking industry in pursuing AI, the Edelman Trust Barometer shows work is needed to build trust in the technology.
Climate change
On to the third global megatrend, climate change, which has become a major concern for insurers – with significant ramifications for the financial sector.
Last year, extreme events across the globe cost the insurance industry nearly $US150 billion[14] , the most since 2017.
As premiums rise, underinsurance is worsening globally.
This has profound implications for Australia.
We're ranked 22nd[15] out of 193 counties for natural disaster risk, so we already face greater exposure to climate-related events.
As disasters become more common and severe, we see more households being priced out of insurance.
The Actuaries Institute[16] estimates 15% of Australian households are under extreme insurance stress, with premiums exceeding one month's gross annual income.
Already, 5% of Australian homes are either uninsurable or unaffordable to insure, according to analysts at Climate Valuation[17] .
That's expected to become 10% of homes over the next decade.
This will impact house values and the ability of affected householders to either secure finance or meet their existing mortgage obligations.
There are obvious flow-on effects for the Australian housing market, a mainstay of the financial services industry and the wider economy.
Impact on consumer behaviours and lending practices
All of this points to Australian consumers – your customers – facing sustained pressures over the foreseeable future.
On the face of it, we're seeing promising economic improvement.
GDP is improving, the cost of living has stabilised and interest rates have started to come down.
Unemployment remains low and consumer confidence is on the rise.
But, as the revised IMF forecasts show, circumstances can quickly change.
Personal insolvency system overview
As a regulator, I look at how that might play into personal insolvencies.
To give you some perspective, we expect around 12,400 insolvencies in 2024-25.
That's a modest increase on last year's 11,600 insolvencies.
But it's a huge decrease on the record 37,000 insolvencies in 2009-10 after the Global Financial Crisis.
Even as recently as 2017, at the start of the Hayne Royal Commission, personal insolvencies sat at more than 30,000 a year.
There's been a structural shift since then.
So, what changed? Three things.
Creditor behaviour changed in the wake of the Royal Commission.
Creditors are now much more likely to work with their customers who are experiencing financial difficulty – to seek solutions and to reach a workable compromise.
Debtor behaviour changed in the wake of the pandemic. People in financial difficulty are now much more likely to raise these issues with their creditors.
And unemployment is lower. Ten years ago, unemployment was between 5% and 6% – but for the last 3 years, it's had a 3 or a 4 in front of it.
This means people are better placed to meet their financial obligations.
But there's a cohort of people who remain susceptible and, at AFSA, we see the sharp end of that financial vulnerability.
People entering our system often don't have an established asset base to fall back on when times get tough. They don't own a home or have a mortgage.
In fact, renters make up around 90% of new personal insolvencies. This is at odds with an economy where 31% of Australians rent.
People entering personal insolvency also have relatively little debt.
Around half have debts of less than $50,000, compared to the average Australian household debt of more than $260,000[18] .
Fifty thousand dollars. That's the equivalent of a couple of credit cards, a personal loan and a handful of buy now pay later agreements.
In other words, personal insolvencies are largely skewed towards renters with unsecured debts and a low savings or asset base.
These debtors are less able to fortify their finances against external shocks such as the recent cost-of-living pressures or current geopolitical uncertainty.
The changing unsecured credit market
Given their reliance on unsecured credit, we also look at the phenomenal shift that's occurred in that market over the years.
Back in 2008, personal credit – of which approximately 80% is unsecured – accounted for around 14% of GDP. Now it's around 6%[19] .
Now, instead of taking out a personal loan to buy a second car, people are using their redraw facility or offset account. It's a smart choice, a lower cost of finance.
This has allowed product innovation in the unsecured credit market, and new players to enter the market.
Buy now, pay later has become more prominent in the credit system, with reports that over 30% of people are using it to cover essentials like groceries and fuel.
In the personal insolvency system, approximately 2% of new debtors entering personal insolvency a decade ago had a BNPL debt. Last year, it was 49%.
It still makes up a small portion of the credit system – less than 1% – because the amount of credit is usually in the hundreds of dollars. But its contribution is growing.
Other products gaining traction in the unsecured credit market include payday loans and cryptocurrency.
This all adds up to higher risk coming into the system, in two ways – through products with higher risk profiles and operators without a social licence to operate.
How do we respond?
It's clear from the trends I've outlined that constant and unpredictable change is becoming more normal.
As regulators, our work must always consider the future of the systems we oversee.
We must take a holistic approach and continuously adapt our processes to meet the evolving needs of the Australian economy and community.
At the end of the day, AFSA's role is to support people to interact positively with the credit system.
That's also your role.
In every speech I make – whether to creditors like yourselves, insolvency trustees or financial counsellors – I highlight our shared responsibility to uphold the integrity of the Australian credit system and ensure public confidence in it.
We believe the system works best when we all work together.
That's why I encourage industry participants like yourselves to model best practice and work with us to stamp out misconduct.
If you see something wrong, say something. Don't walk past it. Don't let it be the standard you accept.
It's not just the right thing to do. There are important business imperatives to demonstrating a social licence to operate.
Key among them is that in an uncertain world, trust matters.
Businesses need to work harder than ever to build customer trust and support the customer experience.
The 25th edition of the Edelman Trust Barometer bears this out.
It says consumer trust in governments and business is at a premium. Indeed, long-held mistrust for these institutions has turned to grievance.
In Australia, 62%[20] of respondents have a moderate or high sense of grievance, believing government and business make their lives harder.
This manifests in a lack of optimism for the future, with only 36% believing the next generation will be better off.
As Edelman warns, this places the social contract at risk.
And when that happens, instability, unrest and conflict ensues.
Conclusion
Your discussions today will explore many areas of opportunity and challenge for your businesses.
That's important to the continued growth of the banking sector and the Australian economy.
And in a world of increasing complexity and uncertainty, it's necessary to take a wider systemic lens.
We need to look at what's on the horizon – here and abroad – and consider its impact on the system rather than an individual line of business.
We need to have a curious mindset about the unintended consequences of business decisions, that may erode public trust and consumer confidence.
Businesses pay a high financial price for breaking that trust. Because, once broken, it is hard to rebuild.
As you continue your discussions today, think about how you demonstrate your social licence to operate.
Let David Morrison's words echo in your ears.
The standard you walk past is the standard you accept.
Footnotes
[1] The Global Economy Enters a New Era | IMFBlog
[2] APRA Chair John Lonsdale's speech to the European Australian Business Council | APRA
[3] APRA Chair John Lonsdale's speech to AFR Banking Summit | APRA
[4] Australian CEOs face a wave of geopolitical risks | Lowy Institute
[5] 2024 Global Financial Stability Report | International Monetary Fund
[6] The future of AI in banking | McKinsey & Company
[7] The AI Trust Imperative: Navigating the Future with Confidence | Edelman
[8] Global Cybersecurity Outlook 2025 | World Economic Forum
[9] Australia: home to a booming fintech industry | FinTech Australia
[10] Mobile wallet transactions overtake ATM cash withdrawals in digital banking boom | Australian Banking Association
[11] Fears of a cashless society amid digital banking boom | National Seniors Australia
[12] We must stop the crime before it happens to stem the scam epidemic | NAB News
[13] CommBank's strong financial position provides extended support to customers | CommBank
[14] Atlas Magazine N°218, February 2025
[15] World Risk Report 2023 [PDF]
[16] Media Release: Home insurance affordability worsens in Australia [PDF]
[17] One in 10 homes could become uninsurable by 2035, analyst warns | ABC News
[18] Average household debt grows by 7.3 per cent | Australian Bureau of Statistics
[19] RBA.
