It seems the easier it is to use, the more readily we are willing to consume. With the tech-evolution taking over the banking sector as we transition into a world of contactless transactions, experts are predicting the demise of street corner and shopping centre teller-machines and ATM operator profits.
Physical credit and debit card transactions worth $100 or less, requiring more than a number or microchip to complete, will be obsolete by 2020 according to business information analysts at IBISWorld.
Using cash and cheques for nominal acquisitions is almost a ‘dark ages’ concept these days, as PIN-only and credit and debit card purchases gain favour, posting annualised transaction growth of 6.6% and 14.2% respectively, over the four years to 2013-14.
We still like to hand over a cheque for bigger ticket items, as evidenced by a reported historically high average cheque value of $4,045.
But overall, the retail sector is starting to pose a bit of a threat as it claims a stake in the transaction market of the future. Even though IBISWorld is confident in the Big Four’s continued dominance of the lending sector, some other commercial players are starting to elbow their way into the fray.
According to IBISWorld Australia general manager, Dan Ruthven, “While banks remain the dominant force behind consumer and business lending, Coles’ impending foray into personal loans could be indicative of things to come as supermarkets, airlines and department stores attempt to muscle in on the market.”
He goes on to point out that the new ‘contactless’ playing field is largely where this opportunity for competition around credit and consumer debt has arisen.
“There’s little standing in the way of non-traditional firms entering the retail banking sector,” said Ruthven. “Improving technology, centralised contact points and the reduced use of branches are the main factors driving new companies into the uncharted waters of retail banking.”
Of course it will take some time to chip away at the competition margins, with the Big Four boys controlling around $2.3 trillion in loans as at June 2014, compared to the $87.9 billion in loans provided to households by financial corporations and businesses other than banks.
For starters, employers still pay their employees’ wages into a pretty standard bank account of some kind – most of which are held by one of the Big Four. Then there’s the very centralized mortgage market, which also gets in the way of a full transition to higher capital contactless transactions and therefore, new players to the financial provider scene.
If indeed the more traditional methods for exchanging goods and services are on the way out, what does this mean for investors in ATM technology?
IBISWorld reports a continued reduction in the number of bank, credit union and building society branches across 2012-13, in the order of 130 closures over the year. And with more “holes in the wall” around now than there have ever been, it might be time to explore the burgeoning investment opportunities presented by the high tech financial market of tomorrow.
Remember, a good future investment is all about consumer driven supply and demand, and a great deal of forward thinking.
About the Author
Since 2008, David Thomas has built a business aimed at servicing the needs of property investors, owner occupiers and small business owners. David is recognised as one of the top 10 independent mortgage brokerages in the country, David and his team have settled almost billions of dollars worth of residential and investment loans over the last decade.
Known for his straightforward, relatable style, David believes by educating people about property funding; they fare better in the market. By sharing his expertise openly, some of the people he educates will likely become his clients. It's a win-win approach.
David Thomas is a credit representative (Representative Number 506153) of BLSSA Pty Ltd, ACN 117 651 760 (Australian Credit Licence 391237).