Australian regulator calls for more competition in banking
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Rod Sims, chairman of the Australian Competition and Consumer Commission (ACCC), has said that legislative changes might be needed in order for the agency to effectively regulate the acquisition of fintechs by incumbent banks, according to the Australian Financial Review.
Australian regulators are increasingly concerned about competition in the domestic market. In a speech last week, Sims said that Australia's banking market was too concentrated due to a high rate of mergers and acquisitions between Australia's "big four" banks and new market entrants. Such deals are considered on a case-by-case basis, which means that wider patterns of behavior, such as serial acquisitions, can remain unchallenged and the longer-term implications of seemingly small deals can be missed.
As a result, Sims suggested that the ACCC should be able to issue wider rules regarding such deals. He acknowledged that many startups would be unhappy with the comments, as acquisition allows them to bring their ideas to market more quickly, but stressed that Australia's market concentration needs fixing.
It is likely that behind the ACCC's proposal are factors unique to the country's financial services market. As yet, we haven't seen any signs that European or US regulators have similar concerns regarding deals between incumbents and fintechs. That's likely because Australia still has very few challenger banks and fintechs relative to other countries, and they may be more in need of protection.
In part, that's the result of the domination of the market by such a small number of incumbents, and their collective influence. We have already seen signs of their significant hostility to competition in their ongoing feud with Apple.
Three of Australia's four largest banks — Commonwealth Bank, National Australia Bank, and Westpac — are trying to force Apple to let them build their own apps with Apple Pay technology so that their customers can use branded wallets rather than Apple's own solution. This sort of aggression toward fintech solutions is practically unheard of elsewhere.
We’ve entered the most profound era of change for financial services companies since the 1970s brought us index mutual funds, discount brokers and ATMs.
No firm is immune from the coming disruption and every company must have a strategy to harness the powerful advantages of the new fintech revolution.
The battle already underway will create surprising winners and stunned losers among some of the most powerful names in the financial world: The most contentious conflicts (and partnerships) will be between startups that are completely reengineering decades-old practices, traditional power players who are furiously trying to adapt with their own innovations, and total disruption of established technology & processes:
- Traditional Retail Banks vs. Online-Only Banks: Traditional retail banks provide a valuable service, but online-only banks can offer many of the same services with higher rates and lower fees
- Traditional Lenders vs. Peer-to-Peer Marketplaces: P2P lending marketplaces are growing much faster than traditional lenders—only time will tell if the banks strategy of creating their own small loan networks will be successful
- Traditional Asset Managers vs. Robo-Advisors: Robo-advisors like Betterment offer lower fees, lower minimums and solid returns to investors, but the much larger traditional asset managers are creating their own robo-products while providing the kind of handholding that high net worth clients are willing to pay handsomely for.
As you can see, this very fluid environment is creating winners and losers before your eyes…and it’s also creating the potential for new cost savings or growth opportunities for both you and your company.
After months of researching and reporting this important trend, Evan Bakker, research analyst for BI Intelligence, Business Insider's premium research service, has put together an essential report on the fintech ecosystem that explains the new landscape, identifies the ripest areas for disruption, and highlights the some of the most exciting new companies. These new players have the potential to become the next Visa, Paypal or Charles Schwab because they have the potential to transform important areas of the financial services industry like:
- Retail banking
- Lending and Financing
- Payments and Transfers
- Wealth and Asset Management
- Markets and Exchanges
- Insurance
- Blockchain Transactions
If you work in any of these sectors, it’s important for you to understand how the fintech revolution will change your business and possibly even your career. And if you’re employed in any part of the digital economy, you’ll want to know how you can exploit these new technologies to make your employer more efficient, flexible and profitable.
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- Why financial technology is so disruptive to financial services—it will soon change the nature of almost every financial activity, from banking to payments to wealth management.
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- Both sides face serious obstacles—traditional banks and financial services firms are investing heavily in innovation, but leveraging their investments is difficult with so much invested in legacy systems and profit centers.
- Meanwhile, startups are struggling to navigate a rapidly-changing regulatory landscape and must scale up quickly with limited resources.
- The blockchain is a wild card that could completely overhaul financial services. Both major banks and startups around the world are exploring the technology behind the blockchain, which stores and records Bitcoin transactions. This technology could lower the cost of many financial activities to near-zero and could wipe away many traditional banking activities completely.
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