Neo banks may soon replace Australia’s biggest banks!

Posted on July 23, 2018Categories MBA   Leave a comment on Neo banks may soon replace Australia’s biggest banks!

In the last decade, where a the stock market was flush with cash, buying a new company or merging an existing one with a new company was considerably easy. Investment Bankers, Private Equity investors and Venture Capitalists have strongly pushed for mergers/ acquisitions of companies with a similar consumer base. This has allowed them to cater to a much larger segment of the society at a much lower cost. It helped them multiply profits and the value of their investments as their companies have faced very little or no competition in these markets.


The same has been true for the banking sector. Many banks have been acquired by or merged with other larger banks that offer similar services to a common set of consumers at a much lower operating cost. Although this makes a lot of sense from a shareholder’s perspective, consumers having been quite upset due to these arrangements. In an attempt to cut costs, many bank branches were shut down, many other personalized services which were offered, were discontinued; and this has made the going tough for many small businesses and consumers. Consumers are not at all happy about the loss of services, but unfortunately, they don’t have a lot of choice, as the banks offering them have merged together into one.


In a country like Australia, which has a population of just over 24 million, there are just 4 banks that have successfully grown over the years and have dominated the Australian banking sector. These banks are collectively known as the Australian Big 4 and are said to be totally in control of every major banking and financial services business in the country.


However, due to a lack of personalization and an emphasis on cost cutting, many of their consumers are disenchanted with these banks. This is exactly what Neo Banks are capitalizing on. Neo Banks are new age fintech banks that focus on providing customized services to individual consumers and small/ medium businesses using financial technology (fintech). These banks are getting full fledged banking licenses from the Australian Central Bank. Without a lot of investment in brick and mortar branches and a focus on providing best interest rates and other services, Neo banks are looking very attractive for consumers and investors.


The reason why these banks are projected to take a significant chunk of the the Big 4’s business is the fact that the majority of the Australian economy is digital. A huge chunk of the Australian population already used Fintech products. Fintech companies, which are registered as banks, are head and shoulders above traditional banks in terms of providing tech banking and financial solutions. Fintech companies based in Australia are considered to be some of the best in the World and their talent is sought after as they are building some of the latest tools that can challenge global banking giants.


With an economy that has readily accepted fintech and a ready stock of products that can cater to every segment of the Australian market, it is important to note, that this is something very unique for Australia as no other market in the World has adopted fintech like Australia has. Not even US, UK, and EU have as high a penetration of Fintech products as Australia.


The reasons for the same are quite simple. Australia is an economically advanced country, that is one of the first to embrace to any new technology that comes up. It has a strong culture for innovation, which allows it to be a great testing ground for new tech before marketing it globally.


Additionally, Australia has a distinct advantage over most developed economies. A strong University culture. Australian Universities are considered to be some of the best in the world. They have consistently been ranked among the top 10 universities of the world for many years. It allows easy supply of skilled talent to MNCs and startups.


This is a major reason for Australia being a hub for innovation and new tech. Universities provide a steady supply of The University of Western Sydney offers a 27 month MBA/ MAF jointly with BSE Institute Ltd (one of India’s leading financial educational institute). The course is best suited for students who wish to build a global career in finance. Graduates passing out from here have consistently bagged jobs worth $50,000 and are well known for occupying senior management positions in MNCs.


Fintech is a technology that is on track to change the way finance moves through the world. Neo Banks are just the first step towards having a global revolution in banking and finance. Innovation is just another word for change that is constant and limitless. It is only a question of how we react to it and how we adapt it, that shapes our lives.

There are no free lunches in the World, but you can surely count on free trade

Posted on July 14, 2018Categories MBA   Leave a comment on There are no free lunches in the World, but you can surely count on free trade

Free trade seems to be the order of the day! Every nation of every continent is aiming to have as many free trade deals as possible. Suddenly, every country seems to be willing to sign free trade deals.


What is a free trade agreement (FTA)? An FTA allows the countries that have signed them to trade with each other by waiving off all international tariffs and taxes. Without any duties to pay, the final consumer pays much less than what he earlier would have. With a cheaper product, the chances of a consumer buying a product are much higher, thus earning valuable revenue for a company and also the country,


In an age where no corner of the World is unmapped or unreachable for trade, why don’t some countries try to use their dominant market position, to get better trade deals over other countries as compared to a free trade deal. An FTA clearly is a loss of import/ export revenue, so why must a Government lose its revenue. The reason is simple – more trade. By agreeing to a tariff free agreement, there could be many more industries that are currently not selling in the country with the FTA, but they may now do so due to the FTA. Their products become cheaper and more attractive due to the lower cost that they now offer.


The businesses that earn revenue and pay taxes are considered to be the largest contributors to any nation’s treasury. There can be no employees, salaries to pay or taxes to collect, if we do not have businesses and corporations which can provide these jobs and salaries. Any Government is simply the representative of all businesses that export/ import and bring in revenue for the people of the country. By having an FTA, nations get a competitive advantage over competing nations for the goods/ services that they intend to sell in that particular country.


The second advantage is the ease of obtaining raw materials. For the country that exports minerals and other raw materials, the process of exporting is much easier with an FTA in place. They have less formalities to complete and can offer a much better price to their target countries. In some cases, FTAs have clauses that offer subsidies to traders who buy/ sell certain goods. This is true mainly for agricultural products/ perishable products. With subsidies in place, products become cheaper for traders/ businesses, thus making them more competitive in the international market.


This is the reason why many countries are keen to sign FTAs with large economies like USA, EU, Canada, UK, China, Australia and India. The major attraction is the access to a large market that was earlier untapped or inaccessible to a lot of businesses. With an FTA in place businesses now have a larger markets to target and can now expand overseas easily.


Another advantage that many corporates seek to get is the use of technology. Many developed countries such as Australia, New Zealand, USA, etc, have the advantage of having advanced manufacturing facilities that manufacture goods at twice the speed and half the price. This allows businesses to manufacture cheaply and sell it at competitive rates back home and in other markets that they target. It is for this reason that many countries seek out nations with not just a big market, but also having the distinct advantage of strong manufacturing facilities.


Australia is currently the most sought after nation for an FTA. It is primarily due to the availability of a skilled labour force, advanced technology, a supportive Government and its proximity to large markets of India, China and Africa. Australia is currently being wooed by the UK and the EU for a FTA. The reasons are manifold. Australia is an OECD country, has a large market that is well connected and in line with all the major economies of the World. All major corporates have offices here to cater to their Asian clientele. Australian manufacturers are considered to be some of the best in the World. This is due to the large amount of funds invested by the Government in research, development and in innovation. With a low cost of manufacturing, it becomes very easy for major economies of the World to manufacture here and ship it out to other large markets of the World at much lower costs.


Another major reason for investing in Australia is the highly skilled talent that is available in every state of the country. Australia has focused heavily on its education for many decades. Australian Universities modify their curriculum every year to include subjects/ trainings that train students with skills which are in demand. Australian Universities have been consistently ranked as the best in the World because of this reason.


For versatile students who wish to launch their career in the top echelons of a company, The University of Western Sydney’s MBA/ MAF is the perfect bet for them. It is a 2 year program that is offered jointly with BSE Institute Limited, one of India’s best institute for Financial Education. Students passing out from here have consistently bagged jobs offering $ 50,000.


With an abundance of opportunity, resources and talent, Australia is well known globally for offering some of the most lucrative salaries to deserving candidates. Australia is an economy that is built on the back of some sound decisions that investors and innovators have taken. It is definitely a place to build a solid career and a comfortable future.


Australia is currently the hottest economy for investors as all of its market fundamentals are robust which has resulted in it growing consistently quarter after quarter for 28 years! With an advanced economy, a supportive Government and the availability of skilled talent, Australia is on the highway to be the most valuable economy of the World.