The volume of investment into financial technology (FinTech) continues to grow globally, said Danny Gilligan, co-founder and managing director of the Reinventure Group, speaking at CeBIT 2016. But is it a bubble? According to Gilligan, the answer is a firm no.
Australia is still in the early phases in FinTech adoption, but that adoption is happening at an extremely fast rate, and at a much sharper curve compared to the rest of the world. Currently it ranks 5th in FinTech ecosystems globally – a significant jump from 6 to 8 months ago when Australia wasn’t even on the map. There is now also a race between Sydney, Hong Kong and Singapore to see who can be the biggest FinTech ecosystem in the Asia-Pacific region.
In order to move into the top global rankings, Gilligan argues that there are lessons we can take from other countries. It is important to understand that FinTech is an inherently regional (as opposed to global) business mode, in that it has to respond to local market conditions and behaviours. Those markets that have recognised this, such as the UK, have maximised on the opportunities FinTech has provided – the UK is now one of the top 3 FinTech ecosystems globally.
But unlike a company such as Uber, another regional business model, FinTech businesses cannot simply roll out over the existing regulatory models and pay in court later. Existing regulation, therefore, can be a barrier to FinTech growth. This can be seen in the USA where the FinTech market is not supported on a policy level; the USA’s FinTech ecosystem is now lagging behind globally as a result.
So what does Australia need to do to become one of the top three FinTech ecosystems?
Policy innovation: Initiatives such as the Treasury FinTech Advisory Committee, the recent Backing Australian FinTech publication, and the ASIC Innovation hub are a good start, but we need to go further.
Possible initiatives: prioritise action on key recommendations from FinTech Australia including comprehensive credit reporting mandate, open data standards and a regulatory sandbox for innovation.
Benchmark: UK and Singapore
Ecosystem infrastructure: FinTech hubs like Tyron and Stone & Clark have started to build the local ecosystem but we need to grow bigger and faster, and need a central FinTech location to do so.
Possible initiative: Develop the Matrin Place precinct as a consolidated FinTech/start-up destination to further co-locate and strengthen the ecosystem.
Talent attraction: More needs to be done to foster and retain local tech and entrepreneurial talent, as well as attract global talent to Australian start-ups.
Possible initiative: More flexible entrepreneurial via program attracting global talent to Australia
Benchmark: Singapore and Hong Kong
Australia has made massive gains in the FinTech industry in the last year alone, and if we seize the opportunities available to us, and take lessons from other markets, there is nothing to prevent us being one of the world leaders in this area in the near future.