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Afterpay to cash in on openbanking

SarahSimpkins

— 1minute read

28February 2019

Afterpayhas been slated to benefit from open banking when it lands, as greateravailability of data will level out the financial services playing field tonewcomer fintechs, according to an equities investment manager.

DNRCapital said an opportunity arising for investors in the Australian small capsector is the increased use of technology in finance, with fast growingfintechs disrupting the industry.

SamTwindale, portfolio manager of the DNR Capital Australian Emerging Companiesfund said the big four banks have had a significant advantage in the use ofdata, making it difficult for competing players and new entrants to attractcustomers away.

Consumers’banking data being made publicly available under the regime from 1 July willshake up the financial services landscape, he added, allowing smaller companiesto take a share of the $30 billion-combined profit pool of the big four banks.

“Weexpect a range of new innovative products and services to arise to takeadvantage of Open Banking, with greater availability of data providingopportunities for Australian fintechs to thrive,” Mr Twindale said.

“Weexpect one company in particular, Afterpay Touch Group, to be a beneficiaryfrom the transition to Open Banking by allowing the company to more effectivelyassess its customers.”

AlthoughAfterpay was recently under examination in the senate inquiry into the buy nowpay later sector, Mr Twindale endorsed the quality of its business model,saying DNR believes the enterprise has the capability to take share fromtraditional forms of credit.

“Theproduct is resonating with consumers at an exceptional rate, providing analternative to traditional credit cards where usage is declining,” he said.

“Giventhe sector’s rapid growth it has rightly attracted greater regulatory scrutiny,with the recent Senate Committee Inquiry reviewing the risks to consumers.

“Althoughregulation clearly needs to keep pace with technological advancements, webelieve it is unlikely to stifle the significant growth opportunities forhighly disruptive companies like APT.” 

 DNRalso noted other companies benefiting from disruption in the financial serviceslandscape.

ItsCapital Australian Emerging Companies Fund also holds the specialist platformprovider HUB24, as well as financial services software providers includingBravura Solutions.