Could Australia become a leader in Fintech innovation? Right now there are many hopeful signs that suggest the sector could be on the verge of significant disruption.
Traditionally Australian investors have been more conservative when it comes to startups. So far we haven’t seen the same level of investment in startups as in the UK or US, or the equivalent government support.
There are several reasons for this. A key one is that risk is still perceived as high in Australia despite the sector’s potential. This has left many startups starved of funding and held back the kind of disruption seen in other markets.
In the Global Startup Ecosystem Ranking 2015, Sydney fell from the 12th best startup ecosystem around the world to the 16th, while Melbourne dropped out of the top 20 completely.
The good news is that there are clear signs of change in the air. Firstly, several major Australian financial services firms are really starting to embrace change in the industry, for example in June this year NAB announced a $50 million investment in Fintech innovation.
There are also some recent success stories in the Fintech hub industry. For example, Stone & Chalk, which hopes to foster and accelerate “the development of world-leading Fintech startups” and already has several major banks signed up as partners. Then there’s the Tyro Fintech Hub which wants to encourage new generations of Fintech entrepreneurs.
Secondly, Australia has a stable bank acquiring base, but competition between institutions remains strong. As a result, payment companies are open to partnering with innovative value-added-services to enhance support to their merchant customers.
Finally the sharing economy is encouraging growth in startups and entrepreneurial culture.
The desire to disrupt is clearly there but Australia is unlikely to enjoy the kind of stellar growth seen in the UK fintech scene unless we have similar support infrastructure in place.
So how does the UK do it? Let’s take a look and see what lessons Australia could learn from its booming fintech industry.
1. Make it easier to hire skilled people
Finding key talent is the most significant problem for Australian fintechs, according to the Melbourne fintech Census.
The UK has introduced simplified immigration for key workers and entrepreneurs.
Entrepreneur Visa aims to promote the UK as a hub for the world’s brightest and best. One in seven UK companies is owned by someone who has migrated to the UK.
2. Incentivise investors
The availability of private funding is the second highest issue for Australian fintech.
The UK has encouraged investors by offering them generous tax breaks, as well as very favourable treatment on any gains they make. The result is a much more active angel community in the UK with strong networks that startups, such as truRating, can take advantage of in an advisory capacity.
3. Cut red tape
Australian fintechs are split on whether there’s too much regulation. The Australian government has been holding parliamentary “repeal days” to cut billions of dollars’ worth of red tape, such as raising the PAYG entry threshold for around 447,000 small businesses, or reducing processing requirements for international money transfers to help exporters, but there’s a long way to go.
The UK government, as a highly deregulated country, takes a firmly hands-off approach. This minimises barriers to entry for new startups as well as allowing established companies to trial new initiatives.
4. Have a centralised fintech community
Australia faces the geographic obstacle of having its business community largely spit between Sydney and Melbourne. Much like the US, where New York is the finance capital and Silicon Valley the hub for startups.
In the UK, the main fintech hub is the same as the major business centre: London. Centrality makes it much easier for startups to build strong relationships with global companies, as well as attract private investment. This proximity was key for truRating when we built our relationships with all the major payment partners.
5. Train the future workforce
Australian schools aren’t currently producing enough STEM (science, technology, engineering and mathematics) graduates. We have below OECD averages in teaching time for maths and science in schools and rank near the bottom for STEM qualifications.
In the UK, programming has been introduced to the national curriculum in London, growing the skills base. London already has more IT programmers than New York, San Francisco and any other European city, and its tech workforce will grow 22% by 2025.
6. Accelerate growth
In 2012 there were around 28 startup incubators and business accelerators in Australia, mainly in New South Wales. This space is currently experiencing strong growth, but there have been concerns of poor regulation and exploitation.
Accelerator programmes are likewise on the rise in the UK, providing advice and mentoring to fintech startups. London hosts more than 36 accelerators and 70 co-working spaces. One example is Microsoft Ventures, of which truRating is a graduate, among other such as Samlabs, Pointr and Bar Pass. Co-working spaces also help foster alliances and idea sharing.
Unfortunately, many of these benefits are either absent or reduced in Australia. We may not be able to solve issues of geography, and having multiple capitals, but the government could provide more support.
If we take the lead from the UK and collectively focus our efforts on the disruption of the fintech industry, Australian startups could easily take on the world.
Sophie Jillings is the Head of APAC, truRating, the world’s first mass point-of-payment customer feedback system.