FinTech sector could take $13bn from big four banks
The Australian financial technology (FinTech) market could have a major disruptive impact on Australia’s big four banks, which stand to lose $13 billion between them to this new sector by 2020, Frost & Sullivan predicts.
In a new report, the analyst firm forecasts that the Australian FinTech sector will reach over $4 billion in revenues by 2020, including $1 billion in entirely new revenue added to the economy.
Between 2015 and 2020, new and agile FinTech companies are expected to take $10 billion in aggregated revenue away from Australia’s big four banks and contribute $3 billion of new revenue to the financial services sector, for a total of $13 billion in lost opportunity for the big four.
Frost & Sullivan Australia & New Zealand Head of Research for ICT Audrey William said the disruptive potential of the FinTech market should be a serious concern for Australia’s big banks.
“While FinTech will not end traditional financial services, Australian FinTech is in the development stage of the business cycle and already the FinTech start-up space has grown rapidly in Australia,” she said.
“Frost & Sullivan believes that the big four banks must react or face a large dent in future profit growth. The decline in return on equity will continue with the disruption from the FinTech sector.”
In the evolving market, the stability of the big four banks is expected to prove more a weakness than a strength, she said. The banks will need a clear strategy to decentralise their existing range of banking products.
Of the big four banks, Westpac is the most engaged in new technologies to combat FinTech disruption, the research firm said. The company opened an innovation lab in September 2014 and has already invested $50 million in companies throughout the FinTech sector.
CBA is the second most likely to succeed with its efforts to engage the FinTech sector and is also the company with the most to lose through disruption from the FinTech sector. While NAB and ANZ have also developed strong strategies, they are coming late to the party compared to their rivals.
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