Australia’s gone mad for fintech, but whether it will prove the country’s golden ticket as the mining boom dries up is another question.

The industry has certainly captured the Australian government’s imagination, however. A speech can hardly go by without fintech being name-checked by politicians standing in warehouse-turned-startup hubs across the nation.

In the 2016 Budget passed down Tuesday, fintech startups were among the most prominent beneficiaries of federal largesse. The government set aside A$200,000 to promote Australia internationally as a fintech market and it’s considering creating an idea-testing “sandbox”, which will let fintech startups operate without certain regulations for up to six months.

Despite this and further benefits for all entrepreneurs, the government’s emphasis on fintech does not make the ability to create an Uber or Airbnb-sized benefit for the economy any more certain. 

The struggle with growing and crossing borders

The differences in financial regulation country to country is one of fintech’s biggest barriers, making it harder to grow fintech startups beyond Australia’s borders and vice versa.

Rick Baker, cofounder of venture capital firm, Blackbird Ventures, told Mashable Australia he was concerned about the limited potential for scale in Australia’s fintech industry.

“Fintech is not something Blackbird plays in because it doesn’t tend to be global, it tends to be regional because of regulation,” he said. “At Blackbird, our passion is businesses that are global day one, and if we were to invest in fintech, we’d be looking for ones that could attack global markets and be the best in the world, rather than the best in Australia.”

Even U.S. success stories have had a tough time crossing over to Australia because of red tape.

Acorns, an American investment app, spent nine months squaring with Australian financial services regulation before it launched here in February, George Lucas, managing director of Acorns Australia, told Mashable Australia at the time. The stock-trading app Robinhood has also proposed launching in Australia, but financial experts suggested it would have to jump through hoops given its plan to offer U.S. listed stocks.

On the other hand, having a healthy fintech ecosystem is an important part of supporting entrepreneurship broadly, James Mabbott, head of KPMG Innovate at KPMG Australia, told Mashable Australia. “I don’t think it’s the case that a focus on fintech leads to fintech only,” he said, pointing to businesses that have grown outside Sydney’s large financial services sector.

We should also consider the potential for fintech to make the areas connected to banking more efficient, including insurance, wealth management and superannuation, Alex Scandurra, CEO of Sydney fintech hub Stone & Chalk, told Mashable Australia over email.

Mabbott, who helped establish Stone & Chalk, suggested that while not all fintech startups will easily go global, the technology underlying them could. “If you build a robo-advice engine, then whilst there may be significant regulatory requirements in Australia verse the U.S. verse the UK, the core of that engine may well be something you can sell or license for someone to customise [locally],” he added.

Too close for comfort?

In Australia, many of the top banks have formed venture arms that aim to invest in fintech — a phenomenon that could also prove problematic. While extra capital for the startup scene is welcome, having banking so closely tied to the fintech enterprises looking to disrupt them could create a closed-loop ecosystem. 

For Baker, even though access to the banks’ large customer bases is a significant boon for startups, the point is often to get outside the beltway. “You have fintech startups looking to disrupt the big four banks, and now you’ve got the big four banks owning most of those fintech startups,” Baker said. “Be careful that status quo thinking doesn’t creep into your mission or your execution.”

For Mabbott, a close relationship between the incumbents and startups is not unusual, but its impact on fintech isn’t yet clear. “Corporate venture is not new,” he said. “Financial services companies have looked at what’s happened over the past 10 to 12 years, seen the disruption driven in things like media, and decided a non-participatory approach doesn’t work. 

“Longer term, whether it will lead to tension is an interesting question.”

Ultimately, if Australian politicians have a deep affinity for fintech, that’s all well and good as long as other industries also receive enough attention. Mabbott pointed to medtech or agritech as areas that have significant, cross-border potential. “You’d want to see [Australia] expanding where we place our bets into a number of places,” he said.

When politicians are just as eager to preach the virtues of drones in farming, you’ll know we are getting somewhere. 

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