DNR Capital said one opportunity presenting itself for investors in Australia’s small cap sector is the increased use of technology in finance, with fast-growing fintechs disrupting the sector.
DNR Capital Australian Emerging Companies fund portfolio manager Sam Twidale said the big four banks had a significant advantage in the use of data, making it difficult for rival players and new entrants to attract customers.
Consumer banking data made public under the scheme from July 1 will shake up the financial services landscape, he added, allowing small businesses to take a share of the $30 billion in combined profits of the Big Four. banks.
“We expect a range of innovative new products and services to emerge to take advantage of Open Banking, with greater data availability providing opportunities for Australian fintechs to thrive,” Mr Twidale said .
“We hope that one company in particular, Afterpay Touch Group, will benefit from the transition to Open Banking by allowing them to more effectively evaluate their customers.”
Although Afterpay recently came under scrutiny as part of a Senate inquiry into the buy now, pay later sector, Mr Twidale endorsed the quality of its business model, saying the DNR believes the company has the capacity to take a cut from traditional forms of credit.
“The product resonates exceptionally well with consumers, providing an alternative to traditional credit cards whose usage is declining,” he said.
“Given the rapid growth of the sector, it has rightly come under increased regulatory scrutiny, with the recent Senate Commission of Inquiry examining the risks to consumers.
“While regulation clearly needs to keep pace with technological advances, we believe it is unlikely to stifle significant growth opportunities for highly disruptive companies like APT. »
The DNR also noted that other companies were taking advantage of disruptions in the financial services landscape.
Its Capital Australian Emerging Companies Fund also owns specialist platform provider HUB24, as well as financial services software providers including Bravura Solutions.
