The global fintech phenomenon threatens to steal the big four banks’ most valuable customers, a new report by Roy Morgan Research has warned.
According to the report, the fintech sector is growing exponentially, leaving traditional banks looking “dangerously like commodity utilities”.
“The burning question for the traditional Australian banks is: which of their customers are most at risk, most likely to churn? And the disturbing answer is: their most valuable customers,” it said.
Roy Morgan said the fintech phenomenon taps into a new consumer mindset, with 64 per cent of consumers preferring never to use a traditional bank branch again.
An analysis of Roy Morgan’s data by the Centre for Social Economics found that none of the big four banks have a competitive advantage in the “Desire Economy”, where a customer is worth 2.6 times the value of one customer in the traditional economy.
Consumers in the Desire Economy are “younger, well-educated, tech-adopting, urban dwellers”, according to Roy Morgan.
“Forty percent are early adopters of technology, compared to only 5 percent in the traditional economy,” it said.
Sixty-two per cent of consumers in the Desire Economy rely on technology “to put them in control”, compared to 24 per cent of the traditional economy, Roy Morgan added.
“They are also three times (309 per cent) more likely to apply online for a financial product.”
The analysis revealed that ANZ, Westpac and NAB are equal when it comes to their customer base in the Desire Economy (29 per cent), with CBA not far behind with 24 per cent.
Roy Morgan said traditional banks need to fight to retain – and acquire – customers with the highest value potential, “because over in the Desire Economy they’re eyeing off every new fintech offering that comes their way”.
“The response by traditional banks must, therefore, be anything but traditional,” the report said. “It is unlikely, for example, that any of the big four will be able to transform their brand sufficiently to prevent the Desire Economy consumers churning.”
Roy Morgan said one response would be for traditional banks to invest in new market players.
“Westpac-backed venture capital fund Reinventure has already invested in SocietyOne,” the report noted.
“Another response is to build new start-ups from scratch. While this appears high risk, a deep understanding of the mindset of 4.5 million Desire Economy consumers significantly mitigates risk.”