KPMG’s half-yearly financial report of Australia’s major banks points to a familiar headline: resilience under pressure. Profits remain strong, but are declining, while cost-to-income ratios are rising and returns are tightening.
This is not cyclical. It reflects a structural shift in banking economics.
For decades, banks relied on lending margins and card-based payments to drive profitability. Today, those levers are under pressure from margin compression, rising costs, and the emergence of real-time account-to-account (A2A) alternatives. Payments are no longer a supporting function. They are becoming the control point for revenue, cost, and customer ownership.
The signals from the report, Major Banks Half-Year Results 2026, are clear. Profits are holding, but returns are declining, cost-to-income ratios are rising (around 52%), and efficiency is deteriorating. This is not a short-term cycle. It is a compression of the traditional banking model.
To respond, banks must move beyond incremental optimisation and take structural action across five fronts.
1. Productise payments as a core revenue line
Payments can no longer sit as a utility behind deposits and lending.
Banks must:
- Build merchant-facing propositions (checkout, acceptance, reconciliation)
- Monetise data, flows, and value-added services
- Integrate payments into cash flow, lending, and ecosystem plays
👉 The shift is from processing transactions to owning economic flows.
2. Compete for the experience layer (not just rails)
Most banks have enabled real-time payments, but fintechs are winning the interface.
Banks must:
- Build A2A-first checkout and PayTo experiences
- Expose developer-grade APIs
- Improve in-app user experience, which is currently a structural weakness
👉 The winner is not the rail owner. It is the journey owner.
3. Actively rebalance card vs A2A economics
Card economics will not disappear, but they will erode.
Banks need to:
- Introduce intelligent payment routing across cards, A2A, and wallets
- Protect high-margin segments while migrating cost-sensitive use cases
- Redesign pricing models aligned to merchant outcomes
👉 This is about managing margin transition, not reacting to it.
4. Modernise the technology spine (cards, payments, core)
The report signals the need for ongoing technology investment and the pressure for transformation across the sector.
But most banks remain constrained by:
- Legacy card issuing and acquiring platforms
- Batch-oriented core banking systems
- Fragmented, channel-specific architectures
To compete, banks must:
- Decouple payments from core through API-first, event-driven architectures
- Implement payment orchestration layers for real-time routing and control
- Modernise card platforms with tokenisation, real-time controls, and flexible pricing
- Enable 24/7 core integration for liquidity and settlement
👉 Without this, real-time payments cannot scale commercially.
5. Shift to ecosystem-led growth
The analysis of the report indicates that there’s increasing competition and structural change across the sector.
Banks must:
- Partner with fintechs and platforms
- Enable embedded finance and third-party initiation
- Position themselves as platforms, not pipes
Bottom line
The report signals a system under pressure, but also where the answer lies.
Payments are no longer a supporting function. They are the control point for revenue, cost, and customer ownership.
Banks that modernise their technology, own the experience layer, and actively manage the shift to A2A will redefine their economics.
Those that do not will see margins compress, and relevance will follow.