17 Dec 2007
Andrew Cornell, The Australian Financial Review
Not being much chop at forecasting, it is probably prudent for this column not to use the entrails for anything other than a suitable offal dish such as trippa alla Romana.
Nevertheless, even a surreptitous glance at the viscera tells us 2008 is going to bring far more challenges to the financial services industry than 2007.
Interest rates have risen and probably will rise again. Stagflation is a possibility; funding costs are already higher on wholesale markets and won't ease quickly. With or without a US recession, demand will slacken. The credit cycle definitely has peaked. (Although I have picked this one about a dozen times in the past five years.)
But some issues are not so obvious. There are major technology challenges on the horizon as institutions have to come to some decision about their legacy systems, not simply because they are antiquated but because there is increasing evidence that is costing them competitively and not just productively.
Depending upon to whom you listen, 30 per cent to 40 per cent of bank profits to some extent are linked to the payments business, yet the cost of payments in Australia is falling behind global benchmarks.
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