Liven co-founder Grace Wong
The Australian Senate’s Select Committee on Financial Technology and Regulatory Technology released an issues paper this week ahead of its inquiry into the sector.
The committee will look at the size and scope of the opportunity for Australian consumers and business arising from financial technology (fintech) and regulatory technology (regtech); barriers to the uptake of new technologies in the financial sector; the progress of fintech facilitation reform and the benchmarking of comparable global regimes; current regtech practices and the opportunities for the regtech industry to strengthen compliance but also reduce costs; the effectiveness of current initiatives in promoting a positive environment for fintech and regtech startups
Their report is due in October 2020 and submissions to the inquiry are open until December 31.
The issues paper is meant to be a starting point for anyone looking to make a submission. Startup Daily spoke to three tech leaders for their views.
Here’s what they said.
When it comes to the size and scope of the opportunity for Australian consumers and businesses arising from fintech and regtech, as one of the most mature financial services environments, it provides a huge opportunity in innovation and disruption leading to increases in fintech investment.
Operating in a mature environment, consumers are protected, regulation is watertight. Businesses are the ultimate benefactor as this is good for the whole economy and promotes healthy competition.
Fintech has had the most growth of all investment sectors with almost 5x in the last 12 months and now accounting for 40% of total investment. We’ve had huge interest from local and international investors appreciating what that maturity presents as an opportunity for our business. It helps that we are producing some of the world’s best startups – Atlassian and Canva but also newcomers like ourselves (Liven), Judo, and Athena.
The barriers to the uptake of new technologies in the financial sector
As a leading fintech startup, the regulation of blockchain and uncertainty of the tech caused by the government being slow and vague could be seen as a barrier for the sector. We find it interesting that blockchain isn’t even mentioned once in the federal budget. This is not surprising given DTA’s Chief Digital Officer Peter Alexander told a Senate inquiry a year ago to wait for a ‘standardised blockchain’. In my opinion that misses the point, like waiting for a universal mobile operating system before ever buying a phone.
The problem lies in the government thinking it is in a pretty similar state to most progressive governments looking at blockchain and trying to understand it but that’s not the case. Governments and industries alike around the world are racing to reap the benefits of this technology, from delivering productivity to security and efficiency gains.
Blockchain is regarded by many as a foundational pillar to the “Fourth Industrial Revolution” and the new government policy roadmap intends to establish Australia as a ”global leader” in blockchain but the last budget has left industry with more questions than answers mostly about how serious they are in becoming a leader. Sitting on the sidelines waiting for other countries to make breakthroughs is not innovation.
CEO and founder of Lumi
Australia is a very attractive FinTech market, but there’s room for improvement. The next 30 years may not look as positive as the last 30 without some major changes to the way the finance sector is supported and regulated.
It’s pleasing to see the issues paper calling out comparisons to other leading markets such as the UK and Singapore… but we also need to emulate the success of innovation centres such as Israel and Silicon Valley if we’re going to ensure our sector remains a robust, dynamic source of entrepreneurial success in the future. How do we emulate the success of these global leaders?
The biggest changes to support this is need to be made to our current immigration and education systems. Australia needs the brightest and smartest to be able to call this country home and add to the startup economy, while our education system should also be more flexible in letting the people who come to study also stay and work for our startup businesses in particular.
Our highly concentrated banking sector is another source of concern. It is extremely skewed towards property lending which makes it difficult for small businesses and startups to access capital.
Our banking system has been burdened with extreme regulatory and compliance costs which has effectively made them non-active with non-prime lending. Australia also has a very strong, functional legal system which is great for lending businesses.
Fintechs would struggle in jurisdictions that don’t have a system such as Australia’s and we are lucky to have an excellent system backing us, but my personal view is it’s a little heavy-handed on regulation – which could then reduce the opportunities for businesses.
In terms of current barriers, for financial services, the most important things to be able to obtain to run a successful financial services business is access to capital and distribution. The big advantages the banks have is a huge customer base and they are able to borrow easily.
For a disrupter to come in and gain scale, businesses need to offer something that compensates their initial lack of advantage. The environment is competitive, but with an obvious skew towards the banks.
Founder and managing partner of fintech-focused VC firm Seed Space
It’s great to see the issues paper explore the lessons that can be learnt from overseas industries in growing Australia’s FinTech sector and support mechanisms being put in place by other nations. Singapore, for example, is throwing hundreds of millions of dollars developing the FinTech ecosystem through incentives such as tax relief, regulatory reform, grants etc.
The Select Committee should also devise suitable metrics to measure progress and to track the value-ad of their investments in the sector.
The ability for Australia to attract offshore talent remains a key challenge for our government and that should certainly be a key priority for this select committee. We hear it from many different commentators across the tech community that it’s extremely difficult to get high quality tech experts to come here. Not only is Australia geographically isolated but it can be really hard to secure visas for skilled workers. The question at the heart of this issue comes back to government support. The Australian government should certainly be trying to target certain areas or industries where skills shortages are a recurring issue and where they want to promote growth and an uptick in opportunities and give visa relief to those sectors or skill sets.
Connectivity with the UK is key, given similarities in regulation and legal frameworks, and importantly to take on some learnings from the UK which is several years ahead of Australia in the development of its FinTech ecosystem.
As highlighted by the issues paper, the UK-Australia FinTech bridge is a fantastic tool, but so far it has been more of a one way street and we need to do more to draw benefit for Australian FinTechs from that relationship. FinTech bridges could be established with other nations, as the UK is currently doing.
Another key area the committee should look at is how our government can better support our education system with the right incentives to be able to encourage the next wave of talent and create opportunities in certain industries – through spending on research and development or on education reform.
An integral part of this is building the necessary skill sets at a grassroots level through the Australian education system.
All of these are very important aspects to providing the right conditions and a conducive environment for Australians to grow and promote a healthy technology and innovation sector.