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How the fintechs are helping smaller banks rival the big four in payments technology

Cards, the most frequently used method for payments, according to the Reserve Bank of Australia, are a cornerstone of the Australian payments industry, with more than 1165 million transactions taking place on Australian-issued cards in August 2022 alone. 

While the big four banks once dominated the sector, customer-owned, mutual and smaller banks are beginning to increase their market share nationally and rival the major banks by providing improved access to market-leading card products and services. 

With the recent Customer Owned Banking Association conference welcoming more than 800 delegates, their momentum remains strong, and their value proposition is clear. Thanks to the work of fintech, customer-owned, mutual and smaller banks can challenge the big four through fast-to-market card programs that are packed with the latest products, services and payment innovations. 

The average monthly value for card purchases on Australian-issued cards is almost 72 billion, a number that continues to grow as consumers look to combine cards with a range of their financial holdings, including cryptocurrency. It is also underpinned by the rise in Australia’s mutual banks, building societies and credit unions, which has become a $10.4 billion industry. 

As they continue to expand their card and product offerings, this figure is set to rise, resulting in a firmer foothold within the market through increased competition. The recent KPMG Mutuals Industry Review 2021 has highlighted the sector’s track record for innovation, with 91% of respondents saying that their digital channels already have everything they need for banking.

So, it comes as no surprise that customer-owned banks, building societies and credit unions serve the most satisfied banking customers in Australia. Building societies and credit unions both at an over 90 per cent satisfaction rate, compared to major banks at a combined total of just over 77 per cent

As these smaller banks, with a typically strong customer-centric culture, continue to take on more innovative technologies and offer progressive products and services, this gap will only continue to widen whilst increasing competition and expanding the market as a whole.

These trends have also emerged globally throughout the payments sector. In 2020, mobile wallets saw three years of growth in a single year, with the United Kingdom leading the world in uptake and the United States forecast to see a growth rate of 9.1per cent before 2024. Buy now, pay later is also set to double by 2024, with Europe leading the charge ahead of North America and the Asia-Pacific. As consumers continue to navigate away from the major banks for these services, fintech will continue to do a lot of the heavy lifting in driving this uptake in years to come.

This increased competition is driving down prices and allowing consumers to receive faster and improved access to card payments and their associated services, such as buy now pay later. Given that these products were only previously available through major banks, consumers are the ultimate beneficiaries of the broader rollout of innovative digital and payment solutions throughout the industry.

Their competitive edge stems from their offerings being fast to market and affordable, factors that play a key role in the decision-making process when choosing a product and service provider.

In order to grow the industry and provide market-leading services, lenders need to remain on the front foot and continue to innovate and expand their product offerings.

In Australia, NPP is one example of a modern technology which is seeing rapid adoption. Domestically, over 100 financial institutions are offering these services, and in the year to May 2022, they processed more than one billion transactions worth more than one trillion dollars.

Our nation’s growth rates exceed the likes of Singapore and the United Kingdom, making it a key industry segment for the years ahead.

Our industry understands that consumers want access to these services and that their interest is only increasing in the years to come. Mutuals and smaller lenders are driving sector growth, increasing consumer access and helping modernise the industry through their partnerships and work with fintechs.

This will drive our industry forward as we strive towards making Australia a global leader in card and digital payment solutions. 

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Vinnie D’Alessandro

Vinnie D’Alessandro

Vinnie has over 20 years of technology experience spanning operational, architectural, strategic and managerial roles across multiple industries including, financial services, aged care, energy, gaming, retail, tourism, construction and not-for-profit

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