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The founder of UK startup Atom Bank says Australia is ready for a rise in new fintechs that will challenge the dominance of CBA, Westpac, ANZ and NAB.
Anthony Thomson, in Melbourne this week for the Intersekt festival, said there is a misconception in Australia that the local fintech scene significantly lags behind places like the UK.
“Having visited local Australian fintech hubs like Stone and Chalk, there’s some very smart people doing very interesting things and I don’t necessarily get the sense that you are behind other markets like Singapore and the US because, at the end of the day, no one has a monopoly on good ideas,” he said.
With the Australian government and regulators putting in new rules to make it easier for startups to be called “banks”, the time is now right for new challengers, according to Thomson.
“The big four [CBA, Westpac, ANZ and NAB] have got branches in places across the country that no one wants to use and they’re not independent of regulatory challenges,” he said.
“There is a significant opportunity for new banking entrants to come in and take market share away from the incumbents, particularly as the regulator wants to see more consumer choice and therefore more competition for the incumbents.”
Thomson called out the regulatory changes to lower the minimum capital requirement and simplifying the banking licensing process, plus the implementation of an open data regime, as reforms that have now made the Australian market “conducive to new entrants”.
“What the regulator is saying is ‘We’ll help you along the road of that process’. You will still need to raise significant capital to be a bank, but there’s now a lot of opportunity for people to be neo-banks.'”
However, the fintech veteran warned only the startups with the most capital behind them would survive after an intense battle with the Big Four and other startups.
“Banks are very capital consumptive businesses,” said Thomson.
“In Atom, we’ve almost raised close to £300 million ($520 million) to date, which is three or four times more than the other challenger banks put together. There is often a substantial difficulty for new entrants in raising that capital.”
Atom Bank has just completed its first full financial year of operation, which saw 18,000 customers open savings accounts and its customer lending increase from £99 million to £700 million ($1.2 billion). And all this happened while it completed a $125 million capital raising round in February.
Thomson’s comments come after the head of Barclays, a 337-year-old British bank, said in May that his organisation was too big to be challenged by fintechs.
“Large corporations like Microsoft or Barclays need robustness and stability, which are critical to the economy, and very expensive to maintain, and certainly to build from the ground up. So I’m not concerned that new technologies will harm Barclays,” Barclay chief executive Jes Staley said at the time.
With its incumbent “scale, reach and customer bases”, the Big Four were not in any danger of collapsing, Thomson said, but the time was ripe to offer some choice to consumers.
“The big four banks are an oligopoly in Australia, but that means there’s a great opportunity for the new entrants coming in who can challenge that incumbency by giving customers a better deal.”
Thomson has put his money where his mouth is to back up his faith in Australian fintech, by personally investing in Melbourne company Timelio. The peer-to-peer invoice financing startup revealed in July that it had funded $100 million in invoices since launching in 2015.
“[Australia] is very similar to the UK in the way it’s regulated, the social demographics, and the broader financial services industry so it’s one I feel very comfortable in because it’s very similar to the one we’ve operated in for many years,” Thomson said.
Anthony Thomson will be a keynote speaker at the Collab/Collide Summit, held as part of the Intersekt fintech festival backed by the Victorian government, on November 3 in Melbourne. Book your tickets at intersektfestival.com.