RegionsAustralian ‘Big Four’ Banks’ Dominance of FX under Pressure

Australian ‘Big Four’ Banks’ Dominance of FX under Pressure

Australia’s ‘big four’ banks’ dominance of foreign exchange (FX) markets among smaller businesses is under pressure and facing a strong challenge from specialist boutique players, according to new research from banking analysts East & Partners.

The big four consist of National Australia Bank (NAB), Commonwealth Bank of Australia (CBA), Westpac and Australia and New Zealand Bank (ANZ).

East’s ‘Business Foreign Exchange’ (BFX) report looks at FX trading for the micro, small and medium-sized, and lower corporate segments comprising businesses with annual turnover of between A$1m and A$100m. These business segments comprise FX volumes of A$13.9bn annually and represent 58% of Australia’s BFX market.

The research shows that the FX market and wallet shares of the big four are being eroded by specialist players such as Western Union, AMEX, and OzForex.

In the small to medium-sized enterprises (SME) segment, of businesses with between A$5m-A$20m annual turnover, the big fours’ market share in the Spot FX markets fell from 65.3% in October 2012 to 64.0% in April 2013. Over the same period, the combined market share of Western Union, OzForex and AMEX moved from 26.0% to 28.7%.

In terms of wallet share, the average percentage of an SME customer’s Spot FX business with the big four primary service provider also declined over the same period, down 1% to 42.2%. It was a similar pattern in secondary Spot FX provider relationships, where big four market share fell from 52.2% to 50.7% and that of the three boutiques increased marginally to 39.4%.

The trend was the same in the micro market, of businesses turning over A$1m-A$5m a year, where wallet share for the big four slumped from an average of 44.8% to 39.8%.

While the big four managed to maintain principal and secondary market shares for Spot FX among lower corporates (with annual revenues of between A$20m-A$100 m), wallet share continued to be under pressure.

Lachlan Colquhoun, head of markets analysis at East & Partners, said that FX had traditionally been one of the most “banked away from home” of all business banking products, and competition from the specialists is adding a new dimension to that.

“In what is an increasingly digital world of financial services businesses are easily able to choose from a range of FX providers and are doing so based on price and convenience,” said Colquhoun. “The big four have a battle on their hands to cross sell FX to their existing customers, many of whom are more than happy to ‘play away from home’ and share their wallet around when it comes to FX.”

“Unlike many other areas of business banking to this segment, the big four have a fight on their hands in FX.”

Comments are closed.

Subscribe to get your daily business insights

Whitepapers & Resources

2021 Transaction Banking Services Survey
Banking

2021 Transaction Banking Services Survey

2y
CGI Transaction Banking Survey 2020

CGI Transaction Banking Survey 2020

4y
TIS Sanction Screening Survey Report
Payments

TIS Sanction Screening Survey Report

5y
Enhancing your strategic position: Digitalization in Treasury
Payments

Enhancing your strategic position: Digitalization in Treasury

5y
Netting: An Immersive Guide to Global Reconciliation

Netting: An Immersive Guide to Global Reconciliation

5y