What will innovation look like in a consolidated super industry?

Competition will be alive and well in a consolidated superannuation industry as the big players will be pressured to innovate from agile start-ups, according to a financial coaching fintech.

Speaking at an international business review webinar Mark MacLeod, founder of Hey Coach, said the superannuation industry would start to look like other financial sectors.

“We used to have a lot more banks but now we’ve got our four pillars and then we’ve got some neobanks and second tier lenders coming in,” MacLeod said.

“Just because there’s consolidation doesn’t mean that there’s no space for new entrants, but those entrants will look very different, and they’ll be specialised into particular niches.

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“But it doesn’t mean that the knives don’t come out at the big four either – they’re still innovating and fighting for market share and differentiating their services.”

MacLeod said super funds would begin to shift their focus away from compliance and that competitive pressures would remain with increased risk of disruption from start-ups.

“You swallow up all these mid-tier funds and you start to look at some big consolidation, there will be private equity or venture capital looking at opportunities to bring in second-tier competitors,” MacLeod said.

He said the super industry would adopt an iteration driven model of innovation where small amounts of capital would be allocated to research and development projects with opportunity to pivot on the original idea if need be.

“And that’s good for members and shareholders because what you're doing is you're not blowing huge amounts of money and time on things that ultimately won't result in a sustainable change or innovation going forward,” he said.

Super funds should invest in developing a supportive ‘learning culture’ alongside the small-project iteration model, MacLeod said, as fear of failure could deter people from taking risks and attempting to innovate.