Recent research by analysts at Macquarie Group Ltd (ASX: MQG) has put into perspective in dollar terms what most of us already know – that the banking sector is under threat from a wave of new technologies which largely circumvent their systems and reduce their earnings.
According to a report by the ABC, Macquarie's research suggests that, "up to $27 billion is under threat from so-called digital disruptors in the banks' key payments and lending markets."
It's a serious dollar value and luckily for bank shareholders it appears their companies are meeting the challenge of "disruptor" technologies head on. According to Macquarie the 'big four' will spend between $500 million and $3 billion upgrading their IT systems over the next four years – indeed Commonwealth Bank of Australia (ASX: CBA) has already released to the market a wireless payment solution called 'Emmy'.
Despite this huge spend, it's no guarantee of success. An increasingly tech savvy society will continue to encourage disruptor technology companies to innovate and their penetration will likely increase.
For investors there are at least two angles to view this "disruption" from. Firstly, shareholders in the banks need to be alert to the threat these innovations could pose; secondly, for all investors disruptive technology companies can hold serious growth potential so they may wish to position their portfolios to benefit from this particular trend.
Here are two such companies worth keeping on your watch list –
Mint Wireless Limited (ASX: MNW) provides mobile payment solutions and mobile transactions which can provide flexibility to businesses in their payment offering to customers. Mint's product is a competitor to both the Commonwealth Bank's Emmy technology and leading USA mobile payments product Square.
Emerchants Ltd (ASX: EML) is a financial services company which currently specialises in pre-paid financial cards, however its software can be used across a wide variety of mediums and ultimately its offering is a competitor and threat to the banks.
