As we all know. The world’s largest Taxi Company owns no vehicles and the world’s largest accommodation provider holds no real estate. Can a finance provider operate without any cash in their pocket?
Yes, it’s already happening. We have Peer-to-peer lending platforms established in Australia and they are operating successfully. These companies driven by innovation and pure determination to disrupt the banking industry.
Banks are also has the same access to talent and knowledge, like all other new Fintech companies, but they don’t invest in innovation. Banks don’t want to leave traditional banking practice whare, they control all the market and charge whatever they want.
However, with the Fintech revolution, banks are already challenged to change the way they operates. Peer-to-Peer Leading platforms provide better rates, fast approval and better payment options using the latest technology.
How banks get hammered by Fintech revolution?
IBM published an article on 5 disruptive technologies that are challenging the traditional banking model recently and they talk about five extents where banks get hammered by Fintech. According to the article, there are five disruptive technologies that challenging the banking. However, Fintech is challenging banking industry in many ways. Below are few of those many ways Australian Fintech industry taking over banks.
- They are 100% Online and provide fast approvals
Yes, still In Australia we need to visit the bank at some point for our day to day banking. If you are signing a loan application or asking for a limit increase, you will need to visit the bank and provide your ID card or some form of a verification. Still, banks do not adopt any online signature software to signing their contracts and loan applications. However, most Fintech companies are 100% online and they use the latest technology to have a faster application process. Most Fintech companies use online signature for their legal doc’s and it makes the approval and application process faster.
- Provide enhanced merchant technologies for SME’s
Australian SME’s are technology savvy and driven by a younger generation. If you are running a retail business or small business with direct access to consumers, you may find dealing with a bank is quite a headache. All the banks merchant terminals are charging higher fees and they are not advanced enough to provide various facilities to clients. Most new Fintech payment providers have challenged banks with their mobile based merchant devices and they charge a very lower processing fee compare to the banks.
- Peer-to-Peer Lending
Peer to peer concept is taking over most industries. Like Uber and Airbnb there are many platforms to invest money and lend to consumers directly. Investors can choose from different rates and invest money on these platforms. Depends on the risk, you can get much better rates than saving money on a bank account. Borrowers also get to enjoy much cheaper rates compare to banks. Moreover, depends on your credit ratings, these companies can still lend money to applicants with lower credit score. Some may argue these lending platforms are very risky, however, they are operating around the world with very lower default rates and making huge profits.
- Low-cost Marketing and Origination methods
When it’s come to marketing, Most Fintech companies are doing a far better job than most of the traditional banks. Banks spend millions of dollars on their traditional marketing strategies. Running TV ads, radio Ads and advertise on paper can be very costly and it is very hard to calculate cost per acquisition. However, new Fintech firms are using more social media and web-based digital marketing approach to attract new customers. These new digital media marketing methods provide pinpoint reports to track where your money been spent and how much is your cost per acquisition.
Above are only few of many strategies followed by Fintech and peer-to-peer lenders.
Most importantly, Fintech is here to stay and if Banks wants to compete head to head with these new companies. They will need to make changes and adopt new technologies to their banking process. Fintech started with targeting Small business sector and now it’s gradually stepping in to consumer space.