David Swan. The Australian Business Review, 5 February 2019

Fintechs can reap Hayne dividends

Australia’s fintech industry has largely welcomed the Hayne royal commission report, declaring it an opportunity for savvy start-ups to steal customers away from the big banks.

Mark MacLeod is the founder and CEO of fintech start-up Roll-it Super, which describes itself as an ethical financial service.

Mr MacLeod said the royal commission evidenced a financial services sector riddled with conflicts of interest and greed, therefore opening a gap for fintechs so long as they differentiate themselves.

“Mr Hayne’s emphasis was on the organisational culture, leadership and incentives that drove a sales and growth culture at the expense of customers, the law and the ethics of individuals within the sector,” he said.

“Fintech start-ups and investors with rent seeking, ethically questionable business models, based on selling private individual data, having high or hidden fees, exploiting customer ignorance or financial desperation, should be on notice and will face the risk of criminal charges.

“Change is coming and it is not just going to impact the big banks.

“Fintech needs to build around ethical, sustainable business models. In a sector devoid of trust, fintech start-ups can differentiate themselves and shine a new light of openness and transparency.”

He added that the superannuation sector has core structural and market considerations that require the strong hand of regulators to protect consumer interests from people he described as rent seekers.

“Unfortunately, default super had become an inefficient market place where entrenched vested interests maintain a model where unsuspecting consumers collect accounts and fees as they move employers,” he said.

“Hayne and the Productivity Commission before him have made a number of sensible recommendations to address inefficiencies and curb economic rent seekers. It is then up to the innovators and disrupters to redefine product and market dynamics and drive competition.”

Daniel Madhavan is the CEO of the Liberman-backed Impact Investment Group, a private investment and advisory firm.

He told The Australian that a lot more is broken with the financial industry than just its business model.

“If community expectations are our compass then this report as a blueprint on how not to do business in modern Australia,” he said.

“This report shows that the financial system needs to go beyond simply rebuilding trust. The banking and finance industry needs to find its deeper purpose, and show it values what the community values; strong ethics, and a broader focus on helping Australians build a better community and environment.

“I worry about the affect on talent acquisition and retention in our industry. If you were leaving university as one of the most talented graduates in Australia this report gives you 76 reasons to find a career elsewhere.”

Alan Tsen, the chair of Australia’s peak fintech body FinTech Australia, said while his organisation was still digesting the report and its recommendations, it was clear there are many opportunities for fintech start-ups to partner with these institutions to solve some of the systemic issues that have been highlighted.

“Fintech start-ups can also take advantage of the verticals where customers have been poorly served by incumbents,” he said.

“Overall, we see the outcome as highlighting some key areas for improvement in the way customers are served by those providing financial services — this is where many fintech start-up excel, in aligning customer outcomes with their business model.”

MoneyPlace founder and CEO Stuart Stoyan said many fintech founders had left the major banks, given the banks’ ideas to improve the experience or outcomes for customers hadn’t been successful.

Mr Stoyan said those executives had left to create fintechs, which often focus specifically on improving customer outcomes.

“The royal commission hits home the need for all fintechs, new and existing, to ensure the focus of innovation is on improving the customer experience whether that is through cost, easing friction or just creating a better outcomes,” he said.

“A key takeaway for fintech right now will be that many of the major banks customers will be looking for a better, more transparent offering. There’s never been a better time for fintech to attract new customers.”

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