Technological Disruption Not Traditional Competitors Is The Biggest Threat To Australia's Banks

Getty/Michael Dodge

Three of the four majors this week took fixed rate home loans below 5% for the first time as competition for home loans intensifies and the low interest rates in the market give borrowers a chance to lock in super low rates.

But while the majors, credit unions, building societies, mutual banks and regional banks all duke it out for customers in the Australian banking system, the big risk comes from outside, according to Westpac’s chief executive of Australian Financial Services Brian Hartzer.

The AFR reports this morning that Hartzer in a speech yesterday said “the digital revolution that is reshaping the industry will only accelerate as more customers manage their finances online or with smartphones”.

But as this trend accelerates, Hartzer said banks were facing competition from “new sources, as technology firms and other ­businesses, such as supermarket chains, eye their hefty profits”.

Already around the world, large supermarket change have entered banking while locally Coles has joined forces with GE Capital and will begin offering personal loans in 2015.

The Murray Inquiry also signaled a democratisation of banking in Australia and the rise of peer-to-peer lenders and other non-traditional avenues for investment funds to find their way to borrowers.

Impressively, if somewhat awkwardly, Hartzer said that Westpac is trying to “think and act like a 200-year-old start-up company” given the rise of banking disrupters.

“Disruption happens when businesses don’t pay close enough attention to the needs of their customers… We also know that new business models are developing – and they won’t fit neatly inside our current operating model,” Hartzer said.

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