Once upon a time the only finance options were banks. Today, that isn’t the case, and there are a number of new financial technologies that are gaining traction in Australia. So are these new options better than traditional banking? In this article we explore the different options and help you unpack what the best choice is for you and your needs.
Fintech companies are competing against each other, but their real target is to take market share from the established financial services industry that is dominated by the major banks. Their focus is to disrupt the consumer banking sector, an area that is probably long overdue for a little shake up! Fintechs that aren’t already owned or sponsored by a bank are coming towards the banks with laser precision and from all angles.
The benefit that they have is that they aren’t a bank, credit union or building society. They don’t hold a banking licence and this gives them greater freedom with less requirements. It means that they can be faster to innovate and therefore provide very competitive rates with less stringent lending criteria. So if you have a low credit rating or have been declined by a bank you might have more success with one of these companies. They also tend to have lower set up and ongoing costs. They can also personalise your loan and experience more with a range of niche products.
Sounds great right? But what are the risks and concerns?
The banking and finance sector have a long history of scandal and issues that have left people substantially out of pocket. So having lenders in the sector that aren’t held to the same account as the banks is a big risk.
Banks are generally more established and while their processes can be cumbersome it is due to the regulatory requirements that they have to adhere to. These requirements ultimately hold them to account for their actions and decisions and help to prevent consumer issues. It is there to protect consumers.
Banks currently hold the majority of mortgages in Australia, with 50% of mortgages held by two banks CBA and Westpac. Banks have strong infrastructure which gives you incomparable access to services such as physical banks, customer services and support. For ease of access it may be better to have all of your banking with the one institution and some of these fintech companies can’t provide a suite of products and services to cover all your banking needs.
To make the right decision you need to assess your individual needs and requirements to see what the best solution is for you. You should review your banking regularly to ensure that you have the right products and services for your needs at that time. Banking is never a set and forget!
Are you unsure what your best option is?
We are experts in helping our clients with relationship management with Bank Managers and Lenders, with relationships across all major banks we are only too happy to help you navigate this relationship. Speak to our team if you need assistance.
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