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Technology could spell the end of the massive profits the banking giants have been raking in, writes Rob Stock.
ANDREW Sieprath has already embraced a fresh way of managing his cash – a method of ‘‘open banking’’ that is due to hit New Zealand shores in the coming months.
Former ASB banker fits the bill for those with most to gain from not playing by the banks’ rules.
He’s young, tech-savvy, and frequently travels between countries, so he needs to manage his money on the move, and seeks to avoid bank fees or losing money on currency conversions.
His chosen banking provider is Revolut, which isn’t even a bank. It’s a ‘‘fintech’’ company which operates an app-based subscription service used by more than 900,000 Brits and Europeans. It lets them hold money in multiple currencies, make currency conversions at interbank rates, and make payments using their phone or debit cards.
‘‘If you are going abroad it will save you at least 3 per cent on every transaction,’’ Sieprath says. ‘‘You can hold and switch between multiple currencies, and you can spend using the card anywhere in the world. I hate to say it but it’s the Uber for payments.’’
Revolut is just one of three ‘‘open banking’’ services due to launch here in the next few months and which threaten to do to banks what Uber is doing to taxi firms.
Open banking is the term used for systems like Revolut, which offer payments, money management and banking services, without being a bank.
Open-banking cheerleaders, which include the British government, believe that if consumers embrace fintechs like Revolut, there will be more competition among banks, and the cost of banking will fall for ordinary people.
If open banking becomes the normal tool people use to manage their money lives, banks could be relegated to being money wholesalers, selling their wares through open banking services, a bit like vege growers selling their wares through supermarkets.
That could, some believe, spell the death knell for year-on-year profit rises for banks, like the $1.86 billion profit announced this month by ANZ for the year to September, a rise of 21 per cent.
The term ‘‘open banking’’ is heard frequently in the UK, Europe and Australia, where lawmakers and competition authorities view it positively.
But here in New Zealand, where former prime minister Sir John Key has just been appointed as chairman of ANZ, no politician has campaigned on a promise of facilitating open banking.
Will Mahon Heap – the Kiwi in charge of launching Revolut in Australia and New Zealand – says it’s ‘‘a real concern that Australia is going to lead in Australasia’’.
Even if politicians here don’t facilitate open banking, it’s going to happen anyway, says Ben Lynch, the founder of open banking platform Jude, which plans to launch here early next year, targeting tech-savvy university students.
Lynch, who Simplicity KiwiSaver founder Sam Stubbs jokingly calls ‘‘New Zealand’s next billionaire’’, cut his coding teeth with Xero.
Jude will let users link all their bank accounts to its platform, so for the first time it will be possible to have accounts with a range of banks. They will be able to keep tabs on those accounts and manage their payments through a single digital portal, using their mobile phone.
Those who can’t be bothered to type can do their banking through voice commands.
They will effectively have the power to build their own bank, by picking and choosing the services and accounts that suit them best,