4.2 Foreign banks have shown that they are willing to enter banking system Australia’s — between 2007 and 2018, the vast majority of new entrants to the banking system were foreign bank branches. The regulatory framework incentivises foreign banks to enter and compete in the wholesale banking sector, rather than compete for household deposits. While they are important to innovation and to price competition in certain market segments, foreign banks remain focused on specific market segments and are not likely to prove a competitive threat in the broader retail banking sector. 4.3 fintech sector has grown substantially in recent years and offers a range of Australia’s financial services. However, few fintechs consider themselves to be challenger banks. The vast majority are focused on providing services in areas of the financial system with less onerous prudential regulation, such as smallscale funds management and lending, and payments systems. Global technology companies, said to be the potential disruptors, are yet to make a mark in banking and the broader financial system in Australia. 4.4 Fintechs are not, on present indications, likely to have the kind of competitive disruptive effect that would alter the market power of major banks in the foreseeable future. In the long term, lowering barriers to entry and growth, including greater access to consumer data, may lead fintechs to favour competition against incumbents over collaboration. We must look further afield for substantial offsets to current market power.
4.2 Foreign banks have shown that they are willing to enter Australia’s banking system — between 2007 and 2018, the vast majority of new entrants to the banking system were foreign bank branches. The regulatory framework incentivises foreign banks to enter and compete in the wholesale banking sector, rather than compete for household deposits. While they are important to innovation and to price competition in certain market segments, foreign banks remain focused on specific market segments and are not likely to prove a competitive threat in the broader retail banking sector. 4.3 Australia’s fintech sector has grown substantially in recent years and offers a range of financial services. However, few fintechs consider themselves to be challenger banks. The vast majority are focused on providing services in areas of the financial system with less onerous prudential regulation, such as smallscale funds management and lending, and payments systems. Global technology companies, said to be the potential disruptors, are yet to make a mark in banking and the broader financial system in Australia. 4.4 Fintechs are not, on present indications, likely to have the kind of competitive disruptive effect that would alter the market power of major banks in the foreseeable future. In the long term, lowering barriers to entry and growth, including greater access to consumer data, may lead fintechs to favour competition against incumbents over collaboration. We must look further afield for substantial offsets to current market power.
financial-system-overview.docx