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The big banks have recorded profits in 2017, but reports from KPMG and EY have warned them to brace for serious competition from fintech and regulatory framework. The Big Four recorded a combined $31.5 billion cash profit after tax. EY Oceania banking and capital markets leader Tim Dring said their next challenge would be to: "Show they can successfully execute on the digital, customer and regulatory compliance agendas to deliver long-term performance."
Mutual banks, credit unions and building societies have applauded new Federal Government measures which could give them more power to compete with the big banks. Proposed changes to corporate law could make equity fundraising easier. Previously, customer-owned organisations were prevented from raising equity without demutualisation.
Westpac is adopting a cautious approach in implementing artificial intelligence into its systems. The big bank is rebuilding its IT foundations, including creating a customer service hub, before looking at incorporating AI measures.
South Australia's controversial bank tax is dead. Premier Jay Weatherill has announced that the proposed levy will not be pursued because it would not pass the Upper House of parliament. The announcement has been welcomed by the Australian Bankers' Association and small business community.
The Reserve Bank of Australia has told the Federal Parliament that the use of digital currency—like Bitcoin—for payments 'remains relatively limited'. RBA’s Payments Policy Department head Tony Richards said the rising value of Bitcoin was based on speculative value, and that the currency was being used more for illicit and illegal purchases.
"Their use may have some implications for tax authorities and they raise more significant issues for authorities tasked with crime prevention and detection," he said.
The RBA has also maintained the cash rate at the record low of 1.5 per cent for the 15th consecutive month in November. Economists warn any rise in the interest rate could hurt consumers and stall economic growth.
Australia leads the world in mobile banking, research has shown. Data has revealed that total sessions in finance apps doubled leading up to 2016, well ahead of the 36 per cent growth in total worldwide sessions. Downloads of finance apps also increased 15 per cent in the second quarter of 2017—up to 3.8 million downloads.
Mobile phone payment takeup is set to soar in the coming years, Mastercard is predicting. This is largely based on new additions to MPP platforms including; voice-based personal assistants, social messaging and augmented reality additions. Presently, the Reserve Bank states that less than one per cent of transactions are conducted using MPP platforms.
Business is booming in Australia's fintech sector, with the 2017 EY FinTech Australia Census revealing that median revenue has soared by 208 per cent over the 12 months to June 2017. On top of that, one in four companies have reported revenue boosts of at least 700 per cent. Issues identified in the survey include; improvements needed in research and development, government-mandated open data controls and gender diversity in the sector.
The strength of Australian fintech has been showcased to the world, with 10 local businesses featured in the H2 Ventures and KPMG's Fintech100 list. Prospa, ZipMoney and AfterPay Touch were listed in the top 50, while Airwallex, CoverGenius, Hyper Anna, Macrovue, MoneyMe Financial Group, Tic:Toc and Valiant featured in the second half of the list.
Despite this success, one industry heavyweight doesn’t think these fintech startups will provide enough disruption to threaten the major banks. Spectrum Investment Management principal Damien Wood said that fintech technology would never be strong enough to take down "long-standing dominant players" in the banking industry. He said the fact that the banks have a AA credit rating and could borrow from bond markets at a relatively low cost would always give them the edge of smaller players.
Mastercard is housing its digital innovation future in Australia, with its only tech and innovation centre in the southern hemisphere to open in Sydney. The centre will aim to fast-track the creation of new payments technology using artificial intelligence, blockchain, natural language processing and robotics. It comes after Mastercard said physical cards could be obsolete within five years.
To boost this push into new payment platforms, Mastercard has been buying up promising small fintech businesses. These include Australian customer loyalty and rewards business Pinpoint, payment gateway business DataCash and San Francisco-based artificial intelligence start-up Brighterion.
Tech giants are giving the big banks a run for their money, with Chinese online retailer Alibaba providing lending services through Ant Financial. Singles Day in China is a $33 billion spending spree, and Alibaba not only markets wares on this day but provides financial assistance so shoppers can snap up luxury handbags, overseas holidays and more. Other tech giants like Amazon and Facebook have the scale to follow suit, which would present real competition to the banks.
Skype is set to become a payment platform for business, with Microsoft trialling a new type of account that would allow for online payments. Skype Professional Account has been previewed by the tech giant, which merges features from its existing third-party payment platforms as well as Outlook. It is aimed at small business owners and individuals who conduct lessons or tutorials on the platform, giving them an all-in-one system to teach and collect payments.
Australian Blockchain security startup HCash has cashed in on Initial Coin Offerings, raising 21,000 Bitcoins worth of capital. On July 15, 21,000 Bitcoins was worth $53 million.
The Federal Government has established ties with the UK to assist fintech development and help businesses expand their operations abroad. Treasurer Scott Morrison announced the Australia-UK FinTech Bridge
would go beyond existing fintech agreements that Australia has in place with countries like Singapore, Japan and Canada.
"The fintech bridge will enable close collaboration between governments, regulators and industry to identify emerging trends, share policy developments and better position firms for the challenges of entering a foreign market," he said.
The Australian Securities and Investments Commission (ASIC) and the China Securities Regulatory Commission (CSRC) have also entered into an agreement to promote fintech innovation
. The Information Sharing Co-operation Agreement will provide greater information sharing between the two countries.
Australian online, on-demand debt payment service Credit Clear is fundraising in a bid to expand overseas
. The platform was launched 18 months ago, co-founded by Lewis Romano of SpotJobs. Credit Clear has launched a $10 million Series A fundraising round in a bid to push into overseas markets.
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