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Open Banking, Neobanks, … What a start of the year in FinTech

Hotwire Global

What a ride January has been! It’s been only two months since our event on FinTech and Open Banking, but so much has happened that we could probably have another one just to debrief.

Not a day goes by without media coverage on Open Banking, the CDR or neobanks and FinTechs showing momentum. The start of 2020 is an exciting time for anyone involved in banking and finance, and here’s a recap of what’s happened for those who took long holidays:

Open banking delayed (again)

Open Banking was delayed, but can we really blame the ACCC? If you have read our study, Cracking the Code of Open Banking, you already know that Australians’ biggest deterrent in using the regime is security concerns with their banking data. This looks like all stakeholders want to avoid putting banking data in jeopardy just to meet a deadline even though this new delay is a big frustration for FinTechs that will have to wait another six months to leverage Open Banking. Hopefully, this will be the last one.

In the meantime, the ACCC is progressively moving on other items, officially releasing CDR and Open Banking rules, setting the framework the big four banks have to abide by come July 1st 2020. The draft of the comprehensive 108 pages document released a few days ago raised concerns over privacy safeguards back in March, to which the Senate essentially answered “better than nothing.” Watch this space.

Neobanks’ momentum

It looks like emerging players are managing to get momentum without Open Banking anyway. In the banking world, the tide seems to be slowly turning. Xinja and 86400 announced a record combined $220M deposits in just a few months—including $100M in less than three weeks for Xinja. Volt Bank finally launched, with another $70M in its back pocket to innovate and grow, and Judo Bank was flooded by applications from profiles coming from the big four, while their loans to SMEs are steadily growing. No doubt the increasing coverage these emerging players are getting from mainstream publications is helping increase awareness of new and fairer banking alternatives for Australian consumers and businesses that probably had no clue so far they could get a much better deal. A welcome awareness boost in the long neobank journey, with our study showing only 5% of Australians were banking with a neobank as recently as November 2019.

The CBA lion woke up

The big four are taking a hit, but are far from defeated. CBA is starting to roll out its retaliation plan, acquiring European Buy Now Pay Later player Klarna to compete with Afterpay and Zip Co. Too late to the game? Time will tell, but experts at Accenture think banks should rethink their payment offers or risk losing US$3 billion by 2025…especially since the federal government is considering letting non-banks initiate payments under the open banking regime.  Another move from CBA that broke through the noise is the launch of their X15 Ventures, a new entity which is essentially a mega R&D department, where CBA will incubate (and fully own) start-ups developing innovative services designed to enrich the bank’s ecosystem to compete with emerging FinTechs. Microsoft and KPMG are also involved. Potentially an exciting value proposition for CBA consumers that would benefit from new and innovative services, but still not from the best interest rates… In the meantime, don’t miss CBA’s half-year results on Feb 12.

In other news

In the ‘Buy Now, Pay Later’ industry, Afterpay, along with Zip Co, the ASX, the RBA and CBA are leading an inquiry into the financial technology sector to discuss regulatory measures that ensure BNPL services are operating in the best interest of consumers and retail businesses, but also have enough space to keep growing and maintain their level of performance and attractiveness to investors. A fine balance that won’t be easy to find. Good luck!

Also in the news was Wisr’s fast growth, and ezyCollect’s $7.1M capital raising, and maybe a couple of other interesting news items we didn’t see (although we had a very close look!). But it’s probably time for you to get back to work anyway.

Since so much has happened, we have decided to update our whitepaper on Australians’ perceptions of Open Banking. For those of you who didn’t have time to read it, you can download the updated version here.

Looking forward to see what February has in store for us? Us too!