Government must do more to encourage fintech growth, report finds
Though 60 percent of Australia’s almost 600 fintech companies are based in Sydney, between regulatory challenges and there being no “clear business brand for fintech”, the local sector faces competition from international companies and ecosystems, a report has warned.
To be released today by thinktank Committee for Sydney and KPMG, the report, Scaling the Fintech Opportunity: For Sydney and Australia, found that the number of fintech companies in Australia has grown from fewer than 100 in 2014 to 579 today.
The bulk of these are homegrown, with 512 Australian companies and 67 international with Australian operations; the two most popular spaces within the fintech umbrella are payments, which boasts 128 companies, and lending with 80 companies.
Investment in local fintechs has also grown, with US$675 million invested locally across 25 deals in 2016; a report from CB Insights released last week identified Australia, along with Brazil, as a top nation for fintech outside the ‘core markets’.
The Global Fintech Trends report, which analysed the global fintech market between through Q2 2016 to Q2 2017, found that Australia hosted half of the 10 largest fintech deals outside of core markets such as the US, Europe, and Asia.
Despite this growth, however, the report warns that the Australian fintech space faces threats from both larger international tech companies and startups entering the space, while regulatory challenges are stifling progress and could lead to unequal playing fields for all.
Among the report’s key findings is that government plays a crucial role in the continued growth of fintech and must do more to ensure this growth; government policy, support, and vision must be there to support the development of the regulatory environment, as well as development of skills, and talent attraction.
The Federal Government has taken steps forward here, though they have been too small for some.
The announcement of Australian Securities and Investments Commission’s (ASIC) regulatory sandbox for fintechs was welcomed with open arms last year, however it was revealed in May that only one startup had so far made use of it; the government then stated it would look to expand the program.
Also proving controversial has been the government’s equity crowdfunding legislation, which passed earlier this year. Several years in the making, the legislation drew criticism for various stipulations, including that a company must be public in order to list an equity crowdfunding opportunity.
To grow the Sydney fintech ecosystem in particular, the report recommends the NSW Government updates its existing Financial Services Strategy to streamline the efforts of the private and public sector and grow the regtech, blockchain, and payments sectors in particular, and coordinate more extensively with the Federal Government on the promotion of fintech and making it easier for companies to understand and access government support programs.
Ian Pollari, Head of Banking Sector, Sydney, KPMG Australia said, “The findings underscore the substantial growth that the fintech sector has seen in Australia over the past three years, as reflected in both the increasing numbers of fintechs operating locally, as well as the level of investment they have attracted. The challenge now is to see the more mature players scale their businesses, locally, and internationally.”
The report also stated that though London is seen as a global fintech leader, Sydney can establish itself as an Asian Hub, with CEO of the Committee for Sydney, Tim Williams adding, “Apart from its sheer quantum – Sydney’s financial services sector creates 9 percent of national GDP and is bigger in scale than the financial services sector in either Hong Kong or Singapore – a key element in its emerging global reputation is the speedy progress we have made in fintech in Sydney.”
Reflecting its global reputation, Sydney was earlier this year ranked eighth out of 44 fintech hubs in a report from Deloitte, climbing up one spot from last year’s ninth.
With 20 ‘New Hubs’ including Auckland, Tokyo, and Bangkok added to this latest ranking, the Connecting Global FinTech: Interim Hub Review 2017 scored the hubs according to factors including government support, innovation culture, proximity to expertise, and regulation, as self-assessed by ‘hub representatives’.