on May 10, 2017 Klink's Corner Industry Talk Fintech Innovation

Australia's FinTech Industry: Batting above our average ?

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As part of attending the launch of Gker, a  new fintech incubator in Shanghai last week, I was asked to give a presentation on the Australian fintech scene. In researching for the event, it became clear that Australia is steadily building a globally competitive fintech industry, both locally and offshore.

Firstly, a quick review the current fintech state of play. The following chart from KPMG's Pulse of Fintech 4Q 2016 highlights the rapid global growth.

graph ricks blog.jpg

As the charts shows, while US investments slowed dramatically in 2016, the Asia Pacific region has continued its meteoric growth. This conveniently places Australia very close to the centre of all the action. 

With regards to Australia, a recent Frost and Sullivan report, Fintech in Australia Trends, Forecasts and Analysis 2015 – 2020, gives some additional statistics:

  • The Australian Fintech Industry is expected to reach $AUD4b in revenue by 2020
  • Overall CAGR of 76.4%
  • Over $AUD1b in new added value will be delivered to Australian economy
  • Investment in Australian Fintech Sector in 2015 was $A438m

Underpinning this growth in Australian fintech is an extensive network of Incubators, Hubs and Accelerators designed to help Aussie startups get up and running with services such as office space, mentoring and capital raising. Taking this concept to the next level, the NSW government is currently focused on setting up a supersize start-up hub linking new and existing firms into a network rivaling similar ones around the world.

Deloitte's 2017 Global Fintech Hub Review of 44 cities ranked Sydney's Stone and Chalk 7th out of 44 in regards to 'their conductiveness to the growth of FinTech'. This result is up from 9th position in 2016. The ranking is based on three business indices: the Global Financial Centre Index 2016, Doing Business 2017 and the Global Innovation Index 2016

While only scoring Stone and Chalk and not the entire Australian fintech industry, the result does reflect positively for the entire Australian fintech ecosystem.

The Deloitte report does however highlight some general challenges for the Australian fintech industry. These include high cost of living, low access to capital, small market size and technology skills shortage. Some of these challenges may have been behind the closing earlier this year of Australian's original startup incubator - Pollenizer.

To assist Australian fintech companies in selling their products and services offshore, some incubators are expanding their offerings by setting up international operations. While historically, global expansion has been focused on traditional venues such as Silicon Valley and London, startup incubator Fishburners bucked this trend late last year by setting up a hub base in Shanghai.

As part of its National Science and Innovation Agenda (NSIA), the Australian Government has also been actively supporting fintech in offshore expansion. AusTrade has setup landing pads in five key business centres - Berlin, San Francisco, Shanghai (pictured), Singapore and Tel Aviv. The Landing Pad program is designed to assist Australian entrepreneurs with taking their market-ready startups global.

Coupled with this, AusTrade hosted a group of Australian fintech companies in March 2017 on a roadshow to visit technology hubs in Shanghai and Shenzen. The purpose of the mission was for the companies to meet prospective customers, innovators and disruptors at networking events.

How do we continue to support Australian FinTech going forwards. Here are a few ideas:

1. The Australian Federal Government to expand the NSIA agenda to build an Australia-wide supersize hub. This hub could be an expanded version of the NSW State government program. This would see new FinTech hubs being started and co-ordinated in other capital cities of Australia.
 
2. More Australian government/industry partnerships. For example, internationally, AusTrade to partner with Australian Fintech Hubs where possible for real estate etc.
 
3. Expand on our current fintech services exports to China (currently valued at $8.8b in 2014/5). These exports should further leverage both the China–Australia Free Trade Agreement (ChAFTA) and Funds Passport program.
 
To close, I will quote Australia's Treasurer, the Hon Scott Morrison in regards to the importance of fintech to Australia's future:
FinTech is going to revolutionise how consumers and businesses, as the drivers of economic activity, interact. This is going to have big implications for demand in the future. We need to be part of these changes and we have got to work out the best way to engage with FinTech and prepare for the financial system and economy of the future.

General Advice Warning
The information provided in this post is general information only and is not designed for the purpose of providing personal, financial or investment advice. Any examples are presented for illustration purposes and past performance is not a reliable indicator of future performance. The information provided does not take into account your particular investment objectives, financial situation or investment needs.
 

Rick Klink

http://www.openmarkets.com.au/