Leaders of several fintech groups have said the “significant friction” that exists within the traditional banking and finance system has made it “ripe for disruption” from technological companies.
Speaking at the third annual Fintech Summit held in Sydney earlier this week, the managing director and CEO of peer-to-peer lender SocietyOne, Jason Yetton, stressed that now, more than ever, banks are ripe for digital disruption by new and upcoming fintech businesses.
According to Mr Yetton, the Australian banking system is exhibiting many of the factors that frequently lead to disruption, as outlined by Rachel Botsman’s theory of the “collaborative economy”.
He explained: “One: complex experiences. Processes that are so complex, so time consuming and ultimately frustrating for customers. Two: Broken trust in the institution. Three: Redundant intermediaries; layers of people and processes that don’t add any value to the end consumers. Four: Limited access to goods or services that are out of the reach of many people, either due to physical barriers such as price, or availability.”
He added: “There is significant friction embedded in the system that is ripe for disruption.”
As such, Mr Yetton said he believes today’s customers want, and “rightly expect”, a better deal.
Likewise, Clayton Howes, co-founder of personal loans lender MoneyME added: “Millennials are increasingly disillusioned by traditional bureaucratic institutions, and until they fundamentally change that problem, we’ve got an absolute crack at this for the next 10 years.”
SocietyOne’s Mr Yetton suggested that fintechs are thus uniquely placed to potentially shrink the role and relevance of today’s banks.
“Digital technology provides the opportunity for incumbents to create better, faster, cheaper services through partnerships, through alliances and through equity positions that make them an even more essential part of everyday life for Australians,” he said.
“Digital revolution is a strategic crisis for the banks, and it’s different to the global financial crisis, but it’s a crisis nonetheless.”
Automated investment service Stockspot also warned that banks are on the backfoot with technological innovation, as its founder and CEO Chris Brycki highlighted that when it comes to keeping up with the rapid development of fintechs, “banks have the financial means but maybe not the cultural capacity”.
He said: “I think banks consistently come up against the hurdle of messaging and internal conflict when they look at launching these businesses, and they can’t quite work out where they fit, and therefore how they can actually make the most out of their existing customer base.”
Damien Vasta, managing director of mobile payment technology company Sniip, went so far to suggest that banks are handicapped in terms of innovation due to their bureaucratic responsibilities and focus on creating and maintaining their brand.
“Everything that banks design to try and make life easier for their customers is to only apply to their customers and attract customers to their brand,” Mr Vasta said.
“I think that’s where we compete with banks in that we have got one single purpose. Start-ups don’t intend to be all things to all people, but to do one thing really, really well.
“The banks don’t just do one thing really well, they offer a gamut of services designed for only their customers,” he concluded.