Top-heavy bank sector holds back FinTech potential

David McClure

A top-heavy banking ecosystem coupled with an under resourced regulatory regime is holding back Australia’s FinTech progress, according to industry leaders.

The panellists were participating in a session of the Newfound Australia FinTech Market Mission event dealing with the lessons learned by FinTechs in the Australian market.

Australia’s financial layout differs with most other countries in that we have a huge mass of banking activity concentrated in our Big Four banks.

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Banking block: FinTech potential is being stymied by top end banks

Panellist Damir Cuca, founder and chief executive at Basiq an aggregation platform for acquiring financial data believes the Australian banking structure can make it tricky for FinTechs to move as quickly as they would like.

“It would take an average FinTech a single day to integrate into our API platform. With a bank it’s a nine-month pilot, plus another six months before they get to production and many, many meetings along the way.”

However. those long lead times have advantages. “The advantage is that you become a lot more enterprise ready sooner and your platform evolves a lot sooner as well,” said Mr Cuca.

Our top-heavy banking ecosystem does put a drag on financial innovation said panellist Lynda Coker, Commercial Director of Volt Bank, the first Australian consumer neobank, to be issued with a restricted ADI licence by APRA.

“There’s a lot of apathy. Everyone’s trying to digitise banking, but no one’s really doing digital banking yet and that’s the goal,” said Ms Coker.

“For the retail consumer it’s still hard to switch provider, it’s still a pain in the ass, so they don’t. So hopefully with open banking it will become easier.

“There is a genuine appetite to collaborate and connect. Unfortunately, they are large organizations and it takes time.”

Finance technology has a big role to play in removing the frustrations often encountered by customers of insurance outfits, according to panellist Chris Bayley, co-founder and Chief Innovation Officer of insure-tech Cover Genius an insurance distribution platform where the company’s stated goal is to protect all the customers of the world’s largest online companies.

“We have a role to play in how their customer is treated and we take that extremely seriously,” said Mr Bayley.

“Our Net Promoter Score (a measure of customer satisfaction) is 65 positive. The traditional insurers that we compete against tend to be minus 15 to positive 10, at the at the upper range. So there’s a huge difference and the reason is technology underpins everything and automates claims processes.

“This stops traditional problems like the claims manager going on leave and the claims process getting stuck during that period. Technology removes friction and makes the whole thing seamless.”

Australia’s FinTech regulatory regime has been evolving during the last ten years, but it could do with a speed up according to the panel.

“Compared to the UK, there is not as strong a mandate to champion some of these FinTech issues. It’s taken time for the regulator to understand that FinTechs are part of the coming ecosystem said Asher Tan, co-founder and chief executive of digital currency platform CoinJar.

Mr Tan points to UK financial regulator, the Financial Conduct Authority (FCA) as a body Australia could look at emulating.

“The FCA has always been more consultative. They’re more well-resourced to speak to startups and they try to take them forward as opposed to ASIC which is a much smaller organization and doesn’t have the reach and mandate as the FCA. So things take longer,” Mr Tan said.

“We’re getting there eventually, but the process and timing of getting to market has slowed down. In Australia people are waiting by the sidelines hoping for legislation to go through,” said Mr Tan.

Ms Croker believes Australia is moving in the right direction with respect to bringing on open banking but it hasn’t been an easy ride.

“It’s been a struggle and all the banks are heavily involved, but they’ve got pros and cons of how they want things to work. It’s not an easy process. Australia could be a leader in this universe, so it’s important to get it right. I think things are moving in the right direction.”

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