Fintech

When you think ‘fintech’ the first thing that probably springs to mind are mobile apps. But while apps are an integral part of the fintech sphere, especially when many Australians are becoming more reliant on their smartphones for their banking and financial needs, there is a considerable world of fintech beyond them full of different players and a range of emerging concepts.    

Banking and budgeting  

Including everything from the banking apps you know and use everyday to industry-wide changes like the move towards open banking and the introduction of the new payments platform (NPP) in Australia, here are snapshots of some of the categories, concepts and fintech players related to banking and budgeting.   

• Banking Apps: Probably the most well-known piece of fintech for most Australians, the vast majority of Australian banks now provide mobile banking apps which let customers transfer money and check their balances.     
• Budgeting Apps: Gone are the old days of pen and paper budgeting. Australians now have a plethora of mobile-based budget and savings apps at their disposal from the likes of Pocketbook, Frollo to ASIC’s TrackMySPEND.
• Chatbots: From UBank’s Robochat to Commonwealth Bank’s Ceba, banking chatbots are the latest addition to customer service in the banking world, ‘providing services like account balance enquiries and card activations.  
• Neobanks: No, this has nothing to do with The Matrix. Neobanks like Xinja and Volt Bank are the emerging, fully-digital banks aiming to bring down costs and provide greater data and analysis to help consumers better manage their finances.      
• NPP: The NPP (New Payments Platform) is a piece of banking infrastructure born from the collaboration of some of Australia’s most well-known banks. You may have heard of it in relation to instant transfers, but it’s kind of complicated, so read our NPP guide!
• Open Banking: Open banking is one of those massive concepts which is changing banking as we know it through greater transparency and the increased sharing of customer data. You may be familiar with one part of open banking - comprehensive credit reporting - but we also have a guide on it if you’d like to learn more.    
• P2P Lenders: SocietyOne, RateSetter, Harmoney. These are just some of the P2P (peer-to-peer) lenders reshaping the personal loan space by matching Aussie borrowers with other regular Aussies who are willing to lend out money.

Payments

Naturally there’s a lot of overlap here with banking, but when it comes to paying at the checkout these are the fintech innovations that are already available or about to become the norm for many Australians.

• Biometrics: Fingerprint scans, retina scans, facial recognition - you might have already played around with biometric security features on your smartphone. But biometric payments are just around the corner too.
• Digital Wallets: A mobile or digital wallet is an app that gives you the ability to make purchases on your phone via NFC (near-field communication). Think popular options like Apple Pay, Google Pay or Samsung Pay.   
• Wearables: From wristbands to rings, wearable payment technology allows consumers to tap and pay without cash, cards or even their phones!  

Investing

On the other side of the fintech spectrum, new technology and innovations are also making investing more accessible for everyday Australians.   

• Micro Investing: With apps like Raiz and Clover for investments in a mix of asset classes, and platforms such as BrickX for fractional investments in Australian property, there are number of emerging services which allow Aussies to invest with relatively small amounts of money.           
• Robo Advice: Once upon a time you would have needed to turn to a human financial advisor in order to seek - you guessed it - financial advice, but there are an increasing number of robo advice services which offer basic, low-cost investing advice online. Check out our guide on robo advice for a more detailed run through, as well as some of the key players in Australia.

Insurtech, or insurance technology, is really a separate space altogether, but a lot of the core concepts and emerging changes to the insurance industry overlap with fintech. Basically insurtech is to insurance what fintech is to banking. So by better using technology and data, insurtech is aiming to improve processes, policies and create better value insurance products for consumers. Here a couple of ways insurance is changing:

• Usage-based Insurance: Usually associated with car insurance, usage-based insurance is a pretty simple idea: you pay for what you actually use. This could make a heap of sense if you’re paying for a comprehensive car insurance policy but don’t really drive your car very often. Instead, you provide your insurance provider with an estimate of how many kilometers you expect to drive and they create a policy for you based on that figure.
• On-demand Insurance: Instead of a traditional contents insurance policy which covers a whole suite of the belongings inside of your home, companies like Trov are providing consumers with the ability to insure individual valuables (like your laptop or phone) both when they’re at home with you and when you’re on the go. And, because it’s on-demand, insurance can be turned on and off depending on when you actually need to be covered.       
• P2P (peer-to-peer) Insurance: Like P2P lending, P2P insurance ultimately aims to reduce costs, but in this situation individuals come together as a collective and pool their  money in order to purchase cheaper policies. While there are a number of businesses offering different P2P insurance models, many rely on the idea that individuals within a group will be more reluctant to make fraudulent or excessive claims - therefore cutting costs for everyone!

The short answer is that it already is.

Technology is having a huge impact on the way we manage our finances and go about our everyday banking. Here are some of the major ways technology has changed and is changing the banking landscape in Australia.   

1. Shifting the way we pay

While Australia is still a way off from becoming a cashless society, consumers are increasingly turning to their credit and debit cards, phones and even wearable payment technology in order to pay for their goods and services.

And given the move towards biometric security in smartphones, it’s hardly a stretch to imagine pincodes going the same way as cash. In fact, both Visa and Mastercard have announced plans to integrate biometric authentication measures like the use of fingerprints into their payment processes.  

2. Moving online

Gone are the days of face-to-face meetings with your bank manager - at least, that’s probably  the reality for many Australians. But given the mass adoption of smartphones around the world, it’s made complete sense for banks to increase their presence online as well as provide customers with online-friendly banking solutions like mobile banking apps which allow greater flexibility and financial control on the go!  

Mobile and online banking adoption is likely to increase even more with the uptake of mobile and online-based instant payment services like Osko and Beem which piggyback off the NPP and allow users to transfer funds to each other near-instantly. Plus with the emergence of useful online banking features like roundup tools and spending categorisers, not to mention budget, savings and investing apps, mobiles are likely to become an even more alluring banking platform.

But it’s not just apps and other tools making online banking options more appealing for consumers. From peer-to-peer lenders providing online marketplaces with low-cost personal loans to online home loan lenders like loans.com.au and tic:toc offering low-cost mortgages, the internet has provided greater competition with the rise of more challenger lenders.

3.  Opening the system

With a consumer-focused approach, open banking is set to seriously shake up banking systems across the world - and it’s already begun in Australia. One facet of open banking is mandatory Comprehensive Credit Reporting (CCR) which will change the way lenders assess applications for credit. Simply put, as CCR rolls out, lenders will need to share both ‘good’ and ‘bad’ borrower behaviour with credit bureaus, not just the negative behaviour (which has traditionally been the case). This means that not only will consumers have their credit history judged more accurately, responsible borrowers may be offered more alluring rates in the future.  

Open banking and the greater sharing of consumer data is also likely to pave the way for even more ‘challenger’ lenders to hit the market. Digital-only neobanks like Xinja, Volt Bank and 86 400 are already gearing up in Australia, ready to offer consumers greater data insights and customizability of their bank accounts.

Fintech isn’t just for personal banking. Businesses are one of the largest potential beneficiaries of fintech innovations! The heap of online business loan providers which have popped up in recent years, for instance the likes of Moula and Prospa, are just one example of the competition which technology and innovation can bring about.    

Another major potential benefit for business in Australia is the continued rollout of the NPP and the near-instant transfers between accounts from different banks that the platform provides. This could not only be beneficial when it comes to receiving payments from customers, but perhaps even more so when it comes to the ease and speed of payments between businesses themselves which has often been a burden to cash flow in the past.

Because fintech is still an emerging space the rules and structures surrounding it are still evolving, but that doesn’t mean there aren’t fintech regulations already in place in Australia.

But because of the speed with which new apps and platforms pop up, and because many fintech companies rely on user data and other information in order to offer their products and services, it could pay to do some research first. 

• Credentials: If you’re looking to take out a loan with a fintech or even make one your new bank of choice, make sure that they or their parent company have the necessary AFSL (Australian Financial Services Licence) or ADI (Authorised Deposit-Taking Institution) credentials.
• Personal Information: Many budgeting, savings and even some investing apps require you to provide various banking details, either in order to provide a comprehensive overview of your spending habits or to facilitate round ups. For many Aussies, providing these kind of details may be well outside of their comfort zones, but even if you are happy to divulge this kind of information it’s always worth finding out exactly how the fintech will keep them secure.
• Security: If you do find yourself using multiple different platforms and apps to manage your banking or finances, make sure that your passwords are both different and complex. That goes for your email address too, as it’s likely to be a common link between all your different accounts. And if you’re given the option it could even be worth making use of any types of two-factor authentication such as mobile codes, fingerprint scans or even an authenticator app to give that extra layer of protection.