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.