The 20th century saw the rise of big finance and big oil.
Twin towers of power that dominated the global political and economic arena.
But I’d wager that the 21st century will see their end…
As the smoke clears from the Saudi oil fields, it’s becoming clear to most, that relying on such a volatile part of the world for your energy needs isn’t such a wise idea.
Bring on the electric cars, the renewables and the new battery tech I say!
In banking too, you’re seeing a war playing out.
And Australia is set to become the latest battlefield….
As reported by Yahoo Finance UK:
‘Buzzy challenger banks such as Monzo, Revolut, and Starling have been blamed for tarnishing the brands of traditional high street lenders, who have lost a collective $1.4bn (£1.1bn) in brand value over the last 12 months.’
It’s not just in the UK that this is happening.
Brazilian challenger bank, Nubank, just raised more money from venture capitalists at a US$10 billion valuation. The six-year-old fintech company is now the sixth largest bank in Brazil by number of customers.
German neo bank N26 is getting set to launch in the US. Just as its 150-year-old compatriot Deutsche Bank is getting ready to retreat.
Everywhere you look it’s the same story.
And this huge tidal wave of global disruption is heading straight for Australia’s big banks.
They can’t escape it. It will hit their profit margins and affect bank dividend payments.
At least that’s what the experience of other markets tells us…
(Banking) anarchy in the UK
Alex Wright, a partner at Kantar’s Insights Division, commenting on the brand hit on the UK’s big banks:
‘Banks are facing a number of challenges right now, not least the emergence of new and disruptive brands that are connecting with millennials that want a service that is available anytime, anyplace, anywhere.’
As the big banks fall, the neo banks are growing.
It’s reported that in the UK, Monzo already has 2.5 million customers and a satisfaction rating of 80 (out of 100), as opposed to an industry standard of a dismally low 25.
I’ve been looking closely at the UK banking sector as it’s a couple of years ahead of us when it comes to this fintech wave.
For example, they’ve had open data laws in place in banking — a requirement for banks to share customer data with other companies if directed to by the customer — since late 2017.
Open data has made the process of switching to one of the digital-only challenger banks a lot easier than it once was.
It’s also opened up new avenues of attack for specialist lenders to use technology to speed up archaic processes.
It wouldn’t be an exaggeration to say that the move to open data was a big catalyst behind the new challenger banks’ success in the UK.
Similar laws have just hit Australia…
Open data is the catalyst
The new laws started to be phased in a couple of months back.
And by February 2020, big banks will have to make all their credit card, mortgage, deposit and transaction data available if customers request it.
According to competition specialist Deborah Healy, this will be huge:
‘I think this is potentially Earth-shattering for the financial services industry.’
The founder of Open Data Australia, Jamie Leach, naturally agrees. She said:
‘It’s going to be a bit of a game changer.
‘What it is, is you being able to determine if you want a third party, if you want an app that’s going to make your life easier to navigate or offer you better rights, for instance, to access your credit, follow your banking history.
‘It’s about giving consumers that choice.’
As the AFR reported yesterday:
‘There is something brewing in the banking landscape that will shake up the traditional four-pillar model.’
In Australia, the banks have been treated like footy teams. One bank forever, through thick and thin for life.
Indeed, it’s joked in banking circles that customers are more likely to change their spouse than their bank.
With open data, those days are fast coming to an end…
Editor, Money Morning
PS: Three Aussie tech plays outsmarting the ‘big four’ banks. Find out more in this FREE report.