A new report has confirmed that Australia's banking sector faces an uncertain future, with unflattering disclosures emerging on a daily basis from the banking Royal Commission contributing to diminishing customer trust.The inaugural TAS Banking Industry Report, released yesterday, is based on survey responses and direct interviews with C-suite executives from a diverse range of banks, financial institutions, fintechs and start-ups. TAS is a technology provider to the Australian financial services market, and the findings of the report reflect this.The report canvassed industry leaders on their outlook and sentiment and found that one in two banking leaders still believe greater customer engagement and experience is their best strategy for remaining relevant and competitive in the current environment. As the banking royal commission has proved conclusively, these same leaders are grappling with truly understanding the changing customer landscape and are also finding it hard, if not impossible, to adapt their operations and mobilise their teams to be better prepared for ongoing disruption (20 per cent) from so-called "disruptive tech"."Traditional" banking institutions are worried about the growing customer distrust generated by the Royal Commission (21 per cent). And yet, while their leaders said they were seeing more opportunity to advance with disruptive innovation and technology such as artificial intelligence, Big Data and automation, banks continually struggle to fully realise the potential of technologies like AI to carve out a competitive edgeThe report also found that leaders are keen to invest in three big areas over the next 12 months to gain market share and compete globally, including business transformation and technology (37 per cent), digital and data (33 per cent) and alliance partnerships (18 per cent). However, most (58 per cent) are not actively partnering with fintechs or regtechs. This, said Shane Baker, CEO of TAS, demonstrated that there are opportunities ripe for the taking for those organisations wanting to carve out some market differentiation by partnering with these emerging businesses.In a panel discussion set up to launch the report in Sydney, Michelle Bagnall, chief executive of one of Australia's newest mutual banks, RACQ Bank, freely admitted her bank saw its small size as a competitive advantage, allowing it to quickly partner with fintechs. "We won't build it ourselves, we'll partner," she said.A fellow panellist, Dr Catriona Wallace, founder and CEO of Flamingo AI - a provider of artificial intelligence advice to the banking sector - said the opportunity was there for smaller ADIs to adopt AI, seeing as Australia is a laggard country in terms of this type of technology for banks. "We are seeing a much faster take-up of new tech by second and third tier players," Wallace said.The release of the TAS report coincidentally matched a wide-ranging report from analytics company GlobalData, which found that while standalone robo-advice alone will not attract affluent investors in its own right, it will offer competitive advantages to traditional wealth managers over competitors if combined with human interactions.