Fintechs are making headway in the foreign exchange market, largely at the expense of banks, ACCC research has found.
An ACCC study into Transparency and competition in international money transfer services shows that the FX market share of the four major banks has almost halved, to around 40 per cent, over the last decade.
The ACCC estimates the market share of fintechs at around 45 per cent.
“The entry of new fintech suppliers has significantly altered the competitive landscape for international money transfers” the ACCC said.
“These new players appear to have attracted customers by offering lower prices and in some cases better service features than the big banks. In response, the major banks have, in recent years, been seemingly compelled to lower their prices.
“Fintechs still continue to drive competition in the market and typically offer cheaper prices than the big four banks. The big four banks appear to have responded by, in many cases, removing or reducing flat fees on FX transfers.
“Despite the big four banks reducing their prices in the years since the 2019 Inquiry, they remain higher than many of their rivals, in particular, fintechs.”
The increase in market shares for fintechs may not to be the result of large amounts of consumers switching away from the big banks, the ACCC said, but rather from growth of the overall market.
While there may have been some switching, the big four banks’ total FX volumes have remained relatively steady.
Banks continue to dominate the market for larger FX transfer of greater than $40,000 that are likely predominantly business or wholesale transactions.