The domination of Australian banking by the big four banks is nearing its end as agile, tech-focused competitors chip away at their markets, a new report on the evolution of global banking suggests.
ANZ, Commonwealth, NAB and Westpac's position as the nation's central providers of financial products is being eroded by the consumer-centric rise of fintech, the Capgemini World Retail Banking Report says.
Capgemini banking and capital markets industry practice head, Phil Gomm, said Australian banks are latecomers to open banking opportunities compared to institutions elsewhere.
"The clock is ticking, the barriers to distribution have eroded through technology, so the majors need to embrace and collaborate with fintechs," Mr Gomm said.
"The majors have the scale to maintain an advisory interface but the days of the model of dominant distribution of financial products are over.
While traditional banks still enjoy a significant hold on their customer base, more agile and customer-centric fintech firms are achieving traction worldwide, with nearly one-third of banking customers surveyed having a relationship with at least one non-traditional firm.
Fintechs - or financial technology companies - use digital technology, including data-derived services and online interaction - to offer new products in financial services ranging from payments to loan applications.
According to the report, released Tuesday, the key to securing customer loyalty is for traditional banks to collaborate across technology providers and drive open banking - the sharing and personalisation of banking data.
Such a move would boost innovation and allow banks to monetise their data, opening up new revenue streams.
However, Australia is well behind the eight ball on that measure, Mr Gomm said.
"It is a mistake for Australian banks to stall on an open banking strategy by simply defending their position using inflated security concerns," Mr Gomm said.
"It's just not sustainable for Australian banks to hide behind legacy models."
Mr Gomm said regulation is driving innovation in Europe and the market is driving innovation in North America.
"Australia is somewhere in the middle," he said.
The Australian government introduced an open banking regime in its federal budget, with the scheme to increase customers' access to their personal banking data from 2018.
"The government has been telling banks to get on with it and open your banking to new technologies. The clock is ticking, the barriers to distribution have eroded through technology," Mr Gomm said.
According to Mr Gomm, there is some cause for optimism, as National Australia Bank, through its Nablabs and NAB Ventures and Westpac through its Reinventure fund both look to be progressive.
"If the banks accept the government position that ultimately consumers own the data then it is up to the consumer to decide what is ultimately done with it, Mr Gomm said.
