Australian payments company Tyro boss Jost Stollmann is concerned Australia’s big banks are picking and choosing which fintech innovations survive in the heavily regulated market and he wants the regulator to step in and even out the playing field.
“The major regulators could encourage and support Australian startups by offering a graduated regulatory regime that is commensurate with the risk that new business models and players inject into the banking space,” he said in a blog post.
Tyro has been around for about 11 years and in that time has grown to employ more than 160 staff, secure over 12,000 customers and process more than $6.5 billion in transactions. It also has Atlassian’s Mike Cannon-Brookes on the board.
“We can continue to pay lip services to innovation and competition, protecting the core banking system and dividend yields or we can take action, change course and open up banking to competition. We have fallen hopelessly behind on the global stage. The success stories are written elsewhere,” he said of Australia’s fintech space.
Stollmann said the playing field needs to be leveled and that there is a place for the big banks in the new digital space.
“In the absence of a level playing field regulation, effect test and punitive or treble penalties, big banks can stifle competition,” he said.
“Big institutions are good at big scale marketing and distribution, not at trying daring new ideas and accepting failures, the critical ingredients for disruptive innovation.
“The reality is that regrettably the major banks decided against that approach. Instead of offering open APIs to the startup community that enable real-time access to the banking system, they reluctantly implemented a drawn out effort in the form of a new shared payment infrastructure; ultimately only delivered under pressure from the Reserve Bank of Australia. Old world thinking.”
Stollmann explained if startups can’t compete under the current regulations they will move into the “shadow space” where he said: “the risks are that much more intransparent and literally out of their control”.
Stollmann told Business Insider there were two types of financial startups – those that complement the major bank’s offerings – and those that disrupt it.
He said the former get support from the big four and while he said nurturing some startups is a good thing, being selective about it could mean the next Atlassian or Xero could be falling by the wayside.
“We need to urgently change tack. There are so many potential new entrepreneurs, startups, incubators, accelerators that merit a fair go. Now is the time to do anything and everything to allow them to succeed. We are late in the global race. Would it not be great, if we also had some great success stories in banking? In other industries we have seen some of these coming from Down Under,” he said.
Stollmann said access to infrastructure and markets is being “blocked by the banks”.
“It’s good to see the increasing groundswell of debate around Australia’s readiness for the digital century, but I am very worried. Australia is at a crossroads,” he said.
“The major banks could nurture Australian startups to strive and scale up quickly, enabling them to compete with disruptive new ideas that will ultimately let the big banks compete on the global stage.”
The big banks talk about their drive to innovate a lot; spending big bucks on startup investments, accelerator programs and internal development. Stollmann said as these organisations overhaul their legacy systems there’s a significant opportunity for upstarts to creep up on them.
“There are now a few emerging new entrants and innovators in the Australian financial services and banking space and there is some hype in the community around banking being ripe for disruption,” he said.