3 top ASX shares being disrupted by technology

FlexiGroup Limited (ASX:FXL) clears the decks to stay relevant while others are content to sit on their hands.

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New technology brings new opportunities.

Last week I attended a finance industry conference and walked out confident that things are going to change rapidly for Australian finance companies. While the big banks and established institutions are probably slightly less vulnerable to this than others due to their market share and momentum, there are sizeable niches being developed by fintech companies that we need to take notice of.

Lease Disruption

Take, for example, the humble business equipment lease. For an established business it means paying a monthly finance fee for a period of between 1 and 5 years for a piece of equipment that is ultimately pivotal to the success of the business, after which time the business can fork out a balloon payment to hold onto it indefinitely.

The benefit of these types of agreements has been fast approval times and flexibility. However new entrants in the market are offering business loans based purely on an algorithm-analysis of a business' revenue (through a bank account) in order to provide loans at similar interest rates, and the business can avoid paying a balloon at the end of the term to keep the equipment. Oh and it can be approved in minutes.

Keep on your toes

Another story emerged over the last fortnight of an online-only mortgage broking company that was offering customers who refinanced their mortgage via their website the opportunity to receive 50% of the upfront commission.

Takeaways for Investing

This doesn't mean that existing companies will all fall over at the same time. In the last week we've seen the new CEO at FlexiGroup Limited (ASX: FXL) pleasingly cut some 'old' style parts of the business. However, companies like Thorn Group Ltd (ASX: TGA) and potentially even Cash Converters International Ltd (ASX: CCV) need to think strategically about how technology will impact their businesses.

Motley Fool contributor Andrew Mudie owns shares of FlexiGroup Limited. You can find Andrew on Twitter @andrewmudie The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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