Fintech is exploding.
It is a global industry, striving to change the future of finance.
…And the future is now. At Kurtosys, we’ve set out to cover exactly what’s happening in the financial industry the world over, one country at a time. With so many places contributing to the advancement of our digital world, each deserves their own time in the spotlight.
In this first edition (exciting!), our focus is AUSTRALIA. You’ve guessed it, we’re doing this thing alphabetically. Read on to discover the buzzing fintech hub of Sydney, and the country’s ambitious steps to become a forerunner in the Asia-Pacific financial market.
It wouldn’t be an international-centric blog post without including a bit on stereotypes would it? In an affectionate way of course. So here goes…
What’s the first thing you think of when someone says ‘Australia’? Snorkling with Shane Warne on the Great Barrier Reef? Receiving sweet cuddles from koalas? Getting attacked by a boxing kangaroo who’s trying to steal your shrimp off the barbie? Yes, this time around we’re heading Down Under. For a country strongly affiliated with Asia, where some of the continent’s countries are so influential in the fintech industry, it’s a surprise that Oz goes slightly more under the radar. However, with the release of the KPMG Fintech100 2016, it is evident that Australian startups are blooming. It’s finally time to ask: how is Australia looking to innovate their financial sector? And another more important question: what on earth is a billabong* anyway? I jest. Also, watch Summer Heights High you gallahs; it’s very funny.
That’s enough of that. Let’s get onto the business side of things.
Australia’s ‘Silicon Valley’
Silicon Valley has become so famed as a hub of technological development that now it is a model for other centres of fintech expertise to emulate. For Australia, it is its major cities in New South Wales that are the main players in tech, none more so than Sydney.
Not only is it the most populous of Oz’s metropolises, the state capital of New South Wales, and boasts itself as the cultural hub with its iconic Sydney Opera House, but it also harbours (pun fully intended) the centre for Asia-Pacific’s economic activities. Known as the Central Business District (CBD), it is the city’s financial and economic centre. Many of the global banking heavyweights are situated right here, including Citibank, Deutsche Bank, AXA and HSBC, just to name a few.
This of course provides the city with renowned financial experience, paving the way for its many up-and-coming fintech companies. Quite laughably, Sid Sahgal – CEO of a worldwide share investment platform Macrovue – notes that Australians thought that fintech was “some technology for surfboards”. Fast forward two years and the country is now in fact punching well above its weight in the global fintech scene.
Hubs and Accelerators
The reason for the success of Australian fintech is its strong eco-system. So-called ‘incubators’, ‘hubs’ and ‘accelerators’ are companies which offer support (financially, or as mentors) to entrepreneurs and startups. Many of these are non-profit organisations. It’s almost like a harmonious fintech family of the newborn (the startup), the parent (the accelerator), and the godparent that tends to give you money on your birthday (corporates and government). Here are some of Australia’s most notable examples:
Based in Sydney, the groovily-named Stone & Chalk defines itself as “the centre of gravity for the local FinTech ecosystem”. It is a non-profit organisation with the aim of fostering the best homegrown startup companies, whilst also attracting the globe’s best nascent fintech minds to Australia. It attempts to dip its toes into the full spectrum of the fintech world, including P2P lending, crowdfunding, cryptocurrency and robo-advisors.
Remember being a kid, going to a party, getting introduced to a cool bunch in the year above and spending the night bonding over all the sport you played and the famous people you’d met? Me neither, but Slingshot emulates this idea, metaphorically. This accelerator introduces corporates to young, talented ideas people and/or their companies, and nurtures entrepreneurs using corporate innovation programs. It is based in Sydney, Melbourne and Newcastle, so has a massive importance in Australia’s fintech startup scene.
Some startup companies that have been accelerated by Muru-D include those focusing on asset inspection, security intelligence, crowdfunding, portfolio management, CMSs, and lawn mowing. Niche. Backed by Telstra (Australia’s largest telecommunications and media company), Muru-D opens the floor for applications from entrepreneurs and reviews them. It has accelerated 44 startups, with $14m of revenue generated so far, and has a global alliance with 500 others. It is based in Sydney and Singapore, and has a partner program in Brisbane.
In the heart of Sydney’s CBD is Tank Stream Labs, a haven for all budding entrepreneurs that encourages cross-resourcing and knowledge sharing to build a company from the ground up. It’s 2,500 sqm of creativity and businessy buzz to inspire the most innovate minds. Here’s a handy little infographic to illustrate more about them: http://tankstreamlabs.com/members/infographic-2015/
Based in the edgy, more European city of Melbourne, YBF is similar to Tank Stream Labs in that it offers a shared space for entrepreneurs and B2B startups in fintech, IoT, cloud services, SaaS, gamification, AdTech and much more. Over 12,000 individuals are part of their collaborative environment and they run over 200 events per year.
To have a lucid vision is all well and good, but usually being able to build a fintech company from said vision can be a struggle. Australian companies are defiantly attempting to change that perception as one of the most forward-thinking financial centres of the world.
A Helping Hand
Luckily, the government has a similar vision for the future of the Australian financial industry. Through increased investment, the country can take its fintech potential to fruition. You can read a comprehensive report by the Australian Government entitled ‘Backing Australian Fintech’ here, but rest assured: I’ve plucked out the best facts and figures from this lengthy (yet worthwhile) piece.
- 80% of employed Australians work in the services sector, but financial services exports only account for around 5%.
- The financial services sector is the largest contributor to Australia’s economy; around $140billion to GDP over a year.
- The Government has introduced ways to incentivise investment for nascent innovation companies. These include a 20% non-refundable tax offset on investment, capped at $200,000 per investor per year.
- Introduced in November 2016, a new Entrepreneur Visa offers financial support from a third party to foreign entrepreneurs.
- On 1 July 2016, $8million was committed to an Incubator Support Program.
- The Government has established a FinTech Advisory Group to work in conjunction with the Treasurer.
- $36million is to be invested over five years as part of a Global Innovation Strategy to improve Australia’s collaboration in innovation and science on an international stage, supporting the establishment of five ‘landing pads’ in Tel Aviv, San Francisco, Shanghai and two other locations.
- Fintech investment was roughly US$20billion in 2015 – seven times that of the prior three years.
- On 20 December 2015, the China-Australia Free Trade Agreement (ChAFTA) allowed for transparency in regulatory changes and streamlining of financial services license applications between the two powerhouses.
- Through to 2019/20, the Government is providing $30million to establish an industry-led Cyber Security Growth Centre.
That’s just scraping the skin. The Aussie Government knows what’s up.
‘Big Hitters’ in Finance
Yes, that is a baseball pun relating to the title of this series. Shameless I know, but it had to be done really.
As an ITNews article makes clear, Australia’s biggest banks control 80% of lending altogether. What this implies is that fintech startups find themselves amongst an ultra-competitive environment.
Yet Australia’s ‘Big Four’ – National Australia Bank, Commonwealth Bank, Westpac and ANZ – may actually find that their country’s newfound tech take-off will knock them off the top spot, or indeed force them to collaborate with small startup companies to remain stalwarts of Australian finance. This is partly due to the heavy regulations imposed on traditional banks, as well as the fact that fintech companies may start to target the banks’ excess profitability.
NAB chief executive Andrew Thorburn claimed that, “I actually think we are a fintech company ourselves. We have to have the mindset of a fintech company, and I actually think we’ve got a lot of the assets of a fintech company”, and the bank has since formed its very own, independent innovation hub called ‘NAB Lab’. It does, however, plan to invest $50million in startups. Commonwealth Bank, alternately, actively partners with startups and so does ANZ, who have announced a proposed partnership with the aforementioned York Butter Factory. Westpac CIO David Curan also values the future of collaborative innovation between banks and startups. You can read more about these moves here.
And who were the most successful Australian startups this year? The Fintech100 reveals all…
#31 – Prospa is an online lender for small businesses, with funding available in as little as 24 hours. Co-founded by Beau Bertoli and Greg Moshal in 2012.
#43 – Tyro is “for entrepreneurs, by entrepreneurs” and “Australia’s nextgen bank”. It is the country’s only independent EFTPOS banking institution (that stands for Electronic Funds Transfer at Point Of Sale). Co-founded by Peter Haig and Andrew Rothwell in 2003.
#50 – SocietyOne brings borrowers and investors together in one large financial community. Co-founded by Greg and Matt Symons in 2011.
The Rising Stars
Australia had 7 startups shortlisted as starlets in the 2015 Fintech100. Keep your eyes on these.
Avoka was founded in Sydney by Philip Copeland (CEO). It is a cloud-based, digital business platform which increases “customer acquisition” for financial services, as well as the government, the educational sector and more. It has already digitised over 100 million transactions.
Equitise was founded in 2014 by Chris Gilbert (Director), Jonny Wilkinson (Director), Panche Gjorgjevski (CTO) and Will Mahon-Heap. It is a Trans-Tasman (I had to look that term up too…) equity crowdfunding and investment platform for startups.
Metamako was founded by Scott Newham, Dave Snowdon and Charles Thomas. It provides digital solutions for latency sensitive businesses.
Moula was founded by Aris Allegos (CEO), Andrew Watt (COO) and Piers Moller (CTO). Based in Melbourne, is also a business loans company, lending between $5,000 and $250,000.
PromisePay was founded in 2013 by Simon Lee (CEO), Simon Jones (CTO) and Darren McMurtie. It is based in Collingwood, Victoria. It is an online payments engine with over 200,000 users across 150 countries.
Simply Wall St was founded in 2014 by Nick van den Berg (COO) and Al Bentley (CEO) in Sydney. The platform turns data for institutional investment companies into infographics.
StockSpot was founded in 2013 by Chris Brycki (CEO) in Sydney and is an investment robo-advisor and fund manager.
Even more statistics!
If you weren’t already convinced about the validity of Australia as a growing fintech superpower, here’s some more evidence we’ve dug up from the International Trade Administration…
- It has 2 ‘Global Financial Centres’ in Sydney (ranked #15) and Melbourne (ranked #27)
- It is ranked 9th for potential FinTech payments
- It is ranked 8th for potential FinTech sector size overall
…and links to recent industry news:
Strewth! If you want a more off-piste look at the Australian tech underground, the Hello World series by Ashlee Vance has an Australia-based episode which you can watch here. He notes the exodus of Australian tech workers to Silicon Valley, but takes a look at the ones who stayed. They produce revolutionary technology: bio-hacking, aquatic drones and animatronics, and there’s an interview with Melbourne internet retail mogul Ruslan Kogan, as well as a look into how tech can cure disease. You can really get an idea of Sydney and Melbourne’s technological buzz.
The immensity of this article reflects the exponential growth of Australian fintech. We hope it has been helpful. If you like your information more concise and visual, check out this artist’s impression of my words! (Click to enlarge)
Who will be under the fintech microscope next time? Check back soon for more episodes of the Fintech World Series!
*A billabong is like a big lonely puddle of stagnant water. That is all.