ACCC’s Sims warns on big bank fintech takeovers
Competition regulator Rod Sims has warned big bank acquisitions of fintech challengers could stifle competition and deny consumers future benefits from innovation, vowing to closely scrutinise any deals if they arise.
While Mr Sims stressed the Australian Competition and Consumer Commission (ACCC) would not necessarily try to block all such deals, he also indicated the regulator would look more favourably on takeovers of disruptive fintechs by second-tier banks.
However, the chair of a Senate inquiry into fintech, Liberal Senator Andrew Bragg, said it was important the regulator did not deter vital investment in innovation by the big four banks.
With the major banks all looking to invest in fintech as the industry deals with sweeping technological change, the ACCC chairman said it was important for consumers that the big four did not swallow up potential digital challengers.
The major banks have so far preferred to take stakes in fintech firms rather than buy them outright, but Mr Sims said it would be concerning to the ACCC if big banks snapped up their truly disruptive fintech rivals, because of the harm this would do to competition.
“You’ve got four big banks with a fair bit of market power. They are a very well established oligopoly,” Mr Sims told the Sydney Morning Herald and The Age.
“The most likely form of challenge is going to come from innovative fintechs coming up with new ways of doing things.
“We want to make sure that consumers do benefit from that. What we are on the lookout for is the big four … buying anything that has the potential to be a vigorous competitor.”
An ACCC submission to the Senator Bragg-chaired inquiry also said the regulator would carefully scrutinise any transactions where a major bank tried to buy a disruptive fintech – though it would not necessarily block such deals. Mr Sims in October also expressed concerns at the prospect of the big four picking off potential fintech rivals, and the ability of merger laws to deal with that prospect.
Senator Bragg said it was vital that all businesses big and small — including the major banks — were able to invest in innovation. “If we’re going to have policies like the four pillars [which prevents mergers between the big four banks], we have to make sure that we don’t accidentally create four dinosaurs,” Senator Bragg said.
Mr Sims said the ACCC understood fintechs needed to attract capital and have exit strategies, but the regulator would look more favourably on second-tier banks buying disruptive fintechs. “The second-tier banks can give them all the capital they need,” he said.
What we are on the lookout for is the big four … buying anything that has the potential to be a vigorous competitor.
ACCC chairman Rod Sims
KPMG’s global co-leader of fintech, Ian Pollari, said Australian banks had focused mainly on acquiring stakes in local and overseas fintech firms, with the big four investing in more than 50 fintech companies in the past five years.
Mr Pollari said outright merger and acquisition (M&A) activity had been insignificant, but this could change as fintech start-ups grew into established businesses, which banks may want to own. “Of course, ownership comes with risks and challenges to manage for incumbents, for instance, how does the bank ensure that they preserve the entrepreneurial culture and agile decision-making of a fintech they acquire?” Mr Pollari said.
He cautioned against bringing a “protectionist” view of M&A in this market, saying overseas there had also been fintech investment from firms outside banking, such as a recent deal involving Walmart.
In a sign of the industry’s focus on technology Commonwealth Bank chief executive Matt Comyn will this Thursday provide an update on the bank’s technology strategy, including its $US300 million ($388 million) investment in Klarna, a Swedish buy now, pay later firm.
Clancy Yeates is a business reporter.
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Source: Thanks smh.com