The wealthy financial services industry is being targeted by emerging tech start-ups keen to take a share in the huge profits being generated in the sector.
The founders of two of Australia’s most successful technology companies, SEEK and Atlassian, this week warned that the “insane” profits of the major banks (amounting to nearly $30bn per year) were under threat from disruptive new technologies.
Seek co-founder Paul Bassat and Atlassian co-founder Mike Cannon-Brookes told the Financial Review and Macquarie Future Forum that banking profits were at extraordinary levels.
Mr Bassat told the Sydney forum that traditional banks would be forced to adapt to new disruptive trends in the sector like peer-to-peer lending (an online market allowing investors to lend directly to consumers without the presence of a bank).
“There’s a bunch of people that just can’t get the money they need for day-to-day activities… but it’s also an opportunity for yield hungry investors to get better returns without intermediaries taking a pretty significant clip on the way through,” he said.
SocietyOne is one example of an emerging peer-to-peer lender that has generated investment from notable business figures including James Packer and Lachlan Murdoch. Westpac recently took up a stake in the start-up which has already facilitated 200 loans worth about $4 million.
Mr Cannon-Brookes is also director of Tyro payments, a banking competitor that has an authority under the Banking Act to process credit card transactions. He told the forum that further banking competitors would continue to emerge to challenge the primacy of the major institutions.
Mr Bassat said that payments was an area in which significant competition with the major banks was possible with companies like PayPal and MYOB now offering small businesses ways to process credit cards and payments on mobile phones and tablet devices.
According to today’s Financial Review, Australian banks have already started viewing online platforms like Amaon.com, Apple and Google as potential rivals with NAB chairman Michael Chaney citing digital disruption as one of the bank’s major challenges.
