The majority of Australia banks seeking deals and investments with fintechs in the next 12 months as they continue their transformation as digital businesses.
The Australian findings from EY’s 2018 Global Banking Outlook show 80% of Australian banks looking to set up new partnerships or joint ventures in both core and new strategic markets over the next year.
“With the pace of technological change and the speed at which new innovations are hitting the market, it’s not surprising that banks are increasingly focusing on their digital agendas,” says Tim Dring, EY Oceania Banking and Capital Markets Leader.
“Australian banks have already made significant progress in this space and we are already seeing them make significant advancements in areas such as mobile payments platforms, fraud protection, biometric authentication and the use of robotics process automation.”
The banks are facing increasing competition from new market entrants, mostly digital disruptors nibbling at services normally provided by banks, such as loans and deposits.
Digital bank Xinja this month raised more than $1 million in equity crowdfunding. And Australia’s fintech industry is pushing for the fast adoption of stalled private company equity crowdfunding legislation to help more Australian small-to-medium sized businesses access the funds they need to grow.
“So we are likely to see even greater collaboration between traditional financial institutions and e-commerce and other technology platform players, particularly as the open banking reforms progress,” says Dring.
Westpac last year invested $40 million in ZipMoney, a buy now, pay later, no interest service, which is part of ASX-listed Zip Co which this week record December quarter revenue of $9.3 million, up 35%. Transaction volume was up 47% to $140 million.
Dring says Australian’s have always been early adopters of digital and mobile technology. The recent EY FinTech Adoption Index found that Australia has the fifth highest rate of FinTech adoption in the world.
“So, I think what we are seeing in the comparison of digital maturity level is that Australian banks are likely to be benchmarking themselves against emerging competitors and online leaders in other industries, who have more digitally-focused business models and less legacy technology systems to navigate,” he says.