The latest whitepaper by Bravura, titled Fintech and the superannuation value chain: disruption, enhancement or just eating your lunch?, found there was “little evidence” that fintech activity in the superannuation space was adding genuine value to customers.
“Looking closely, very little true holistic disruption is occurring within the Australian superannuation market, with most fintech entrants enhancing rather than disrupting the other pieces within the value chain,” the paper said.
While the paper acknowledged that fintech players had moved into all aspects of the value chain by streamlining processes and creating efficiencies with the use of digital marketing strategies, social media, regtech, gamification, robo-advisers and artificial intelligence, it was sober about the real extent to which it had shaken up the industry.
“Overall, even though a few existing players are losing some of their margin to new start-ups, it can be argued that it amounts to little more than the fintechs eating their lunch,” it said.
“To date, while there is an emerging group of fintechs seeking to work with existing providers to improve efficiency and regulatory compliance, so far, the majority of fintech activity in superannuation has shown little evidence of improving the net return position of the funds or enhancing benefits to members.”
The paper outlined three key reasons why fintech start-ups had failed to significantly disrupt the industry.
Firstly, “proactive” measures had been taken by incumbents to digitally evolve, “thwarting” fintech start-ups’ efforts.
Secondly, these start-ups had a tendency to “follow the money” and “focus almost exclusively on those areas in the value chain with the highest margins and lowest regulatory impact – asset management and distribution”.
Finally, the “complex regulatory environment” and fragmented nature of the Australian super industry has served as a deterrent.
To defend against fintech activity, which is “undoubtedly on the rise”, existing providers were advised to identify their role in the value chain, understand their value proposition and understand customers’ needs.
Incumbents should also pinpoint areas of potential disruption, develop a plan to respond to fintech activity, and upskill and invest in their talent.