Collaboration with start-ups, technology firms and other institutions is driving fintech activity globally with Australian banks leading in the partnership stakes, a new KPMG report revealed.
Australian lenders are moving faster than their global peers when it comes to developing fintech solutions, with 78 per cent of respondents planning or already developing capabilities in-house compared to the global average of 52 per cent.
Similarly, Australian firms were far more likely to be considering acquiring or investing in fintech firms.
KPMG's head of banking and global co-lead for fintech, Ian Pollari said the statistics were reflective of Australia’s collaborative and innovative approach to technology.
Busting the myth
“Taken as a whole, the Australian financial services market has been quicker to adapt to disruption and technology trends,” he said.
“When it comes to embracing disruption to the sector, Australian institutions are up there with the leading players.”
Pollari said the research from KPMG dispelled the myth that Australia’s banks are not open to engaging with the fintech system.
“Arguably, taken as a whole the Australian financial services market has been quicker to adapt to disruption and technology trends," he added.
“They are in fact actively looking to invest and collaborate with start-ups, tech giants, their peers and other institutions.”
Pressed further on Australia’s performance vis a vis innovative lenders like Citi, BBVA, Barclays and Santander, Pollari confirmed that Australian banks are in the top quartile of players globally in terms of the variety of fintech activities.
“For example, Australia's five largest banks have either invested in or acquired more than 50 fintech companies. The fact is that they are up there with leading banks globally."
Furthermore, he argued, what distinguishes Australian institutions from their global counterparts is a willingness and ability to invest outside of their home market.
“For example, Commonwealth Bank’s acquisition of South Africa’s TYME, Westpac's investment in US-based Coinbase though Reinventure, National Australia Bank’s investment in Wave and Suncorp Group’s investment in Trov.
“If we look at the actual, rather than the perceived, activities and investments of the five largest financial institutions in Australia - they alone have collectively either directly (or indirectly through venture arms) partnered with, invested in or acquired more than 50 fintech firms over the past 2 years.
This is a strong level of engagement with the sector and would only be surpassed by the activities of a handful of global players, namely a few of the US and Spanish banks,” noted Pollari.
Beyond investing in start-ups at home and abroad, Australian institutions' fintech activities span the full section of build, buy and partner options.
"Westpac's investment in Uno Home Loans, NAB’s partnership with REA and the recent announcement of Macquarie's Open Banking platform are leading examples of this."
“Looking at the market more broadly, the KPMG fintech head noted there will obviously be some Australian institutions that are too slow to recognise the structural shift that is occurring in the market and they will face serious challenges in the medium-to-long term,” he said.
More than half of respondents surveyed said fintech was the greatest source of disruption today, followed by growing global regulatory uncertainty’ at 51 per cent and new business models at 46 per cent.