Why the big four banks could have their profits crushed by these 3 emerging trends

Can the banks maintain their domination of the Australian financial system?

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The big four banks appear to have taken up the lead by Australian retailers over the past decade or so, and may be ignoring 3 major threats.

Department store retailers as well as our fashion retailers ignored the rise of the internet as major competition for many years and now appear to be paying the price. And it seems the banks may be following their lead.

With a captive market and dominance of Australia’s mortgage market, now the big four may be underestimating the rising threats from big data, digital banking and digital payments, according to the Australian Financial Review (AFR).

Former Citibank executive Grant Halverson has told the AFR that he is staggered by the views presented on technology, having read all the public submissions lodged with the financial system enquiry.

“The views in the industry submissions do not take into account the potential threats that these three major trends expose”, he said.

He also believes that bank boards have yet to fully appreciate what lies ahead. The banks’ submissions to the enquiry have called for regulation of new players in regard to technology – which could be seen as ‘protecting their interests’.

But new concepts like Facebook allowing payments between friends, the rise of Paypal and other means of digital payments appears to be a huge threat to Australia and New Zealand Banking Group (ASX: ANZ), Commonwealth Bank of Australia (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac Banking Corporation (ASX: WBC).

Then there is supermarket Coles – owned by Wesfarmers Ltd (ASX: WES) – that is seeking a banking licence to offer loans and deposit accounts to customers. Coles already offers various types of insurance to its shoppers.

And with newer smartphones carrying Near Field Communication (NFC) technology, the day when we no longer need a plastic card to pay for items such as groceries, clothing and many other items appears to be fast approaching.

Will the banks’ pull their heads of the sand in time?

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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