We are pleased that the Government has taken the time to complete a detailed analysis of the ecosystem, to define a national strategy for fintech.
We would, however, like to state our disappointment that screen scraping has dominated the first few days of the hearing. Especially when there are so many other important issues to enable the growth of the sector to discuss.
The point of establishing this committee to advance fintechs and regtechs growth is to increase jobs, skills and financial literacy across the economy. A debate on screen scraping accomplishes none of these goals.
From our perspective, the reasonable conclusion is that no attempt should be made to outlaw screen scraping until CDR [Consumer Data Right] and CDR data is readily available across the economy.
More broadly, the CDR should be implemented in a manner that is easier to access, provides better functionality and is cheaper than scraping.
This will remove the need for companies to use screen scraping.
We need to progress beyond the framework of the current model and look at its next iteration: CDR 2.0. This should include the ability to initiate payments and look at how consent is managed – including a dynamic approach to consent capture and codification. Management of this needs to be simple, unbundled and granular to drive the digital economy.
Two essential elements to the progression to a digital economy, are moving to a single government body that is responsible for data and a public-private digital ID framework. Without these two factors, we will not see the innovation nation that is dreamt of by the Government to grow jobs across the economy.
The growth of the fintech sector is in the government’s hands. It plays a key role in setting the environment for growth and in promoting both consumer trust and awareness of the fintech industry. Which is why continual engagement between government and industry is key.
No more is this more apparent than in the payments sector, where policy plays a key role in steering innovation and ensuring we stay ahead of global trends.
There is a significant consumer and business demand for payment innovation on this front. Yet, policy in this setting needs to account for legacy systems, new approaches and changing global market trends. Without ongoing engagement with fintechs and a principal-guided approach to policy, Australia risks creating red tape for the sector and falling behind on global payment innovation.
We also believe that the dream of an innovation nation will not be delivered without a comprehensive review of the R&D tax incentive and employee share schemes – which provides fintechs with the tools they need to first survive and later thrive.
A key element of the review should consider the definition of ‘experiments’. This should be broadly interpreted by the ATO and Innovation and Science Australia to include companies that contribute to new and innovative services even when they are built on existing rails, and clearly must also apply to software-based innovation.
Failing to do this will see Australian jobs move offshore, and see our existing talent underutilized.
Meanwhile, each policy push against the fintech industry sets consumer trust and the sector back years in delivering competition and choice, desperately needed in the financial services sector.
A key example of this is the Government not issuing any funds from the first round of capital deployment of the ASFB [Australian Business Securitisation Fund] to any fintech product, preferencing incumbents in the market rather than the fintechs it was originally earmarked for.
Australian fintechs want the government to help fill the funding gap. For reference, this is the period between the creation of the business and its first major funding milestone.
Many suggest this could happen through grants, funding towards angel investment networks, incentives for incumbents to work with startups, and changes to the current ESVCP [Early Stage Venture Capital Partnership] structure. We support all of these measures.
Government investment in FinTech
However, we would like this committee to also consider the approaches taken in the UK and Singapore that have seen the government directly invest in the fintech ecosystem along with empowering the regulators to drive competition. We see such policies as a progressive pro-competitive approach to implementing the mandate for competition.
After the last Global Financial Crisis, the UK government set up Banking Competition Remedies, an independent body aimed at funding and promoting competition in banking.
It’s backed up this innovation with other schemes aimed at providing government-backed fixed interest loans and early-stage investment schemes for startups.
The result? An incredible £4.9 billion was invested in UK fintechs last year.
Meanwhile, in 2015, the Singapore government set up a S$225 million early-stage fintech funding initiative run out of Singapore’s central bank. Since then, the number of fintechs in Singapore has increased from 50 to 600.
The country now frequently breaks its own record for overall fintech investment, which just hit an annual total of S$1.2 billion in 2019.
The key point here is that the government is not carrying this growth. Their respective funding and competition programs only started it. And the resulting external funding has created both jobs and prosperity for the UK and Singapore.
We can’t however, understate our fintech ecosystems achievements to date. We have some fantastic success stories and our own unicorns in the sector to celebrate.
But if you must only take away one point from this speech, it’s this: We can and must do more to capitalize on a sector that is spurring massive global investment.
It’s a golden opportunity, and we will only realise it through regular industry engagement and a willingness to invest in fintech: A sector that time and time again has proven its ability to deliver substantial societal and economic returns.
- Rebecca Schot-Guppy is general manager of FinTech Australia