FinTech might be flavour of the month, but it is not all good news. The inaugural World FinTech Report says that very few FinTech startups have “managed to use their agility and innovation to fill gaping holes in the customer experience left by traditional firms with viable business models that achieve scale and distribution.”
The report is based on a survey of more than 8,000 financial services end users in 15 countries, including Australia, and over 100 interviews with senior executives of financial institutions and corporate users of financial services.
“Australia’s FinTech start-ups are able to attract substantial private investment, and we also see strong institutional appetite from banks looking to take equity in start-up FinTech businesses with promising solutions,” he said.
Another area of controversy present, is the question whether the RG 97 regime lets providers who distribute their products via retail platforms off the hook.
“And it’s coming from many places – angels, VCs, traditional investors, financial institutions. The rise of FinTech has been aided by a perfect storm, created by increasing customer expectations, expanding VC funding, reduced barriers to entry, and increased pace of technological evolution.
“This is especially true in digital payments, where substantial inroads are being made to reduce cost, increase efficiency and deliver the seamless customer experience we now demand from our increasingly digital financial service providers, while payment services continue to migrate to customer mobile devices.”
Australia’s big four banks have all made investments in FinTech. Westpac and NAB have their own VC funds, both of which have made FinTech investments, and they and CBA all have internal teams that they have attempted to infuse the team with a start-up culture by insulating them from their traditional bureaucracy.
ANZ has adopted a slightly different strategy. It is the only one of the four to have partnered with Apple on Apple Pay.
“ANZ seems to be still sorting out its FinTech strategy,” says Mr Gomm. “The others are more committed, but ANZ’s deal with Apple shows it recognises the disruption that is occurring, and is developing its own path.”
FinTech will only grow bigger. What issues the industry is currently facing are essentially teething problems.
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