The Immense Opportunity in the Changing World of Banking

Some investing ideas are hard to find.

They require months of detective work, in the hope that you find something no one else has seen yet. The trick here is to get in early and then wait it out.

Other ideas though, are smack-you-in-the-face obvious. They’re playing out in front of you in plain sight.

And yet here’s the thing…

Most people miss out on both types of opportunity.

One because it’s too hard, or takes too long to work out what’s really happening.

The other because, well, it just seems so obvious. The old saying of ‘not seeing the forest for the trees’ comes to mind here.

Right now, there’s an idea at hand that falls under the latter category. It’s literally staring you in the face, you can’t miss it.

I’m talking about the immense opportunity in the changing world of banking of course.

Think about it…

You know the big banks are on the nose with their customers. You know they’re ripe for a huge shakeup.

And you’ve no doubt heard of the success of new fintech companies like Afterpay (which incidentally hit new share price highs this week).

But do you truly believe it?

In other words, have you invested in this opportunity yet? Have you backed it with the only opinion that ever counts — cold, hard cash on the line?

Maybe you have…

And if so, great! I think you’re onto something big.

But I’d bet a lot of people still haven’t.

Even worse, they’re probably still heavily invested in the main target of this flux, the ones with the most to lose here — the big banks. Either through direct investments or through their super funds.

If that’s you, I think you’d better pay close attention…

Download now: Three ASX fintech stocks taking on the banks (and winning)

The driver of this change?

From the AFR yesterday:

The engine room of the big four’s combined annual profit of $30 billion is at risk of being picked off by a combination of fickle consumers and a category killer like Uber according to a panel of experts.

The driver of this change?

The next generation of banking customers — the so-called millennials and Gen Z age groups.

PwC director Jim Christodouleas told the FINSIA conference in Melbourne this week:

You are looking at a whole generation who has fundamentally changed their relationship with a relatively small corner of the financial services market. The lessons for mortgage providers is extremely important.’

Don’t underestimate how powerful this group of people can be in driving wholesale change in entire industries.

Take Uber for example…

Millennials and Gen Z customers embraced the idea of ride sharing apps like Uber faster than any other demographic.

And turned the cosy taxi monopoly on its head.

Or how about Airbnb?

Rather than complain about the high cost of hotels or the dingy deals offered by hostels, this savvy generation discovered and supported a completely new way of travelling.

That’s the thing about this younger generation.

They cop a lot of flak sometimes, but I think they’re actually pretty ingenious.

Rather than ‘sticking it to the man’ and protesting the status quo like their parents did, they simply find ways to go around the system.

What’s often mistaken for laziness or entitlement is simply a subtle understanding of the use of soft power.

And it’s this power that is about to hit the banking industry…

The disruptors are coming

Australia’s big banks are walking around with a big target on their backs.

Why?

Because they are amongst the most profitable in the world.

So it’s no surprise that the world’s fastest growing fintechs are keen to come here.

For example Robinhood — a US$7.6 billion US share trading platform with six million customers — is coming to Australia soon. They offer commission-free share trading from a very easy to use smartphone app.

How will Aussie share brokers compete against that?

UK challenger bank Monzo is also looking to come to Australia. The four-year-old digital bank is already valued at over two billion pounds and expects to hit three million customers very soon.

So who’s joining Monzo?

As reported in the Guardian:

In its home market, Monzo is particularly popular among millennial customers with a strong following among 20 to 35 year olds, mostly in Britain’s south-east. Just over a third of Monzo’s customers are aged 25 to 31 and every customer is issued a banking card in coral pink, to make them highly visible when used at the bar or coffee shop.

It’s that younger generation again.

But it’s not just a generational thing that the establishment banks have to grapple with. It’s the convergence of a number of important factors.

New tech, regulatory change, political will, customer behaviour…it’s all coming together to create a banking big bang that will change banking forever.

Which just leaves the big question I posed at the start…

Are you going to profit from all this?

If you’d like to, you’re in luck. Because tomorrow I’m going to show you exactly how you could do that.

Look out for that in your inbox…

Good investing,

Ryan Dinse,
Editor, Money Morning

PS: Bank Busters! Three Aussie tech plays outsmarting the ‘big four’ banks. Click here to find out more.


Ryan Dinse is an Editor at Money Morning. He has worked in finance and investing for the past two decades as a financial planner, senior credit analyst, equity trader and fintech entrepreneur. With an academic background in economics, he believes that the key to making good investments is investing appropriately at each stage of the economic cycle. Different market conditions provide different opportunities. Ryan combines fundamental, technical and economic analysis with the goal of making sure you are in the right investments at the right time.  


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