A new index tracking the rate of change within financial services industry has revealed that emerging fintech companies are rapidly changing the face of financial services – and brokers are not immune.
The Disruption Index, a joint initiative from online SME lender Moula and research firm Digital Finance Analytics (DFA), tracks important leading indicators, such as smart device penetration and use, online loan applications and service expectations in the SME sector. Between May and July 2015, the Index stood at 33.02. Between August and October 2015, the Index rose to 33.94. The higher the Index score, the greater the disruption of the industry.
Speaking to Australian Broker
, Martin North
, principal of DFA, said the SME sector has driven disruption in the financial services space.
“There are three things that have happened relatively recently which have fundamentally changed the game. The first thing is the Treasurer gave a 100% capital write-off to small businesses and they have gone out in their droves and bought smart devices. We have seen a very significant rise in the penetration of smart devices as the main device businesses are using for their interactions with their customers, suppliers and the banks.
“The second thing is this means that [businesses] now have a much higher expectation in terms of immediacy of access to information, products and services than they did before. This has created a big gap between where the banks currently are in terms of servicing small business customers and where small businesses want to be.
“The third thing is there are lots of new players coming in and essentially offering a different proposition… People are responding to the opportunity created by the disruptive environment.”
According to North, 2016 is likely to see more fintech businesses enter the market, however the major trend will be existing fintech businesses starting to gain serious momentum.
“I think we are going to see more momentum. I think the peer-to-peer players are going to very interesting and I think we will probably see some new players beginning to think about the wealth creation sector because I think that is an area which is ripe for fintech penetration and development,” North told Australian Broker
Brokers are also likely to face significant disruption through more effective use of technology and data insights, say North.
“I think there is an opportunity particularly in the broker segment for a different way of handling the consumer and a different way of providing advice. This means we are likely to see some different types of broker models.
"In other words, we will see [brokers] using technology in a more thoroughbred way to perhaps provide better advice rather than the cheapest loan. Essentially, they will provide a more tailored proposition. I wouldn’t be surprised if we started to see some more intelligence coming through the broker sector.
“Let’s be honest, a lot of the conversations are price-led to find the cheapest loan but there are a whole bunch of other conversations which could be had if they had access to better data and better insights.”