Competitor Analysis, page-52

A very good article in today's AFR titled "CBA replaces Albert terminals with Smart fleet to integrate apps" is mainly about a new terminal CBA is rolling out to compete head on with Square, Tyro, NAB and BoQ, but it also covers the rise of fintechs in the payment space.

So, I find it interesting that Cirralto are not looking to compete in the terminal business as it does look to be very competitive.

The article is really about the retail B2C transaction at the terminal, because, that is where CBA have some advantage in being able to bring their huge consumer base of customers to retailers in a two sided network. The article says:

CBA thinks its differentiated offering is scale. It believes it can fend off the likes of Square, Stripe and Adyen by promoting its huge retail customer base to merchants.

For example, the development of loyalty apps could help CBA to point its retail customer base to its merchant customers by offering rewards or discounts that will be identified and served by the new terminals.

The strategy recognises buy now, pay later players like Afterpay provide a two-sided network: not only do they offer consumers an easy checkout and interest-free instalment terms but BNPL has driven increased traffic, larger shopping baskets, higher conversion rates and repeat customers to merchants, something CBA wants to emulate.

The bank is also developing real-time data reporting features for retailers that it hopes will be more relevant for Australian merchants given its dominant retail banking market share.

From the article:

Fintech disruption is more pronounced in payments than other areas of banking. Fintechs earn 5 per cent of global banking revenue but 20 per cent of revenue in the $US1.5 trillion payments industry, according to a report by the Boston Consulting Group published last week.

BCG said banks playing in merchant acquiring have “a compelling advantage over non-bank competitors, since they can offer merchant customers both payments acceptance and such banking services as current accounts, foreign exchange hedging, and lending products”.

I find the comment about bank advantage in being able to offer merchant customers lending products interesting, because it is the area of trade finance that we are looking to contest and disrupt. I don't agree with the comment in the article because I think Cirralto can create a competitive advantage, or at least a first mover advantage to carve out a niche, in using supply chain analytics to support supply chain and trade finance. I also note that fintechs are doing just fine in competing with traditional lenders are they are carving out a niche in high quality credit score personal lending in Australia (think Wisr and Plenti) and I also note that in the USA and UK consumer finance fintechs have grown market share considerably.