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 establishStone & 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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Schwark Satyavolu is a general partner at Trinity Ventures where he makes early-stage investments in fintech, security and AI. A serial entrepreneur, he co-founded Yodlee (YDLE) and Truaxis, both of which were acquired. Previously, he held senior executive positions at LifeLock and Mastercard. He is an inventor on 15 patents.
We are living through one of the nation’s longest periods of economic growth. Unfortunately, the good times can’t last forever. A recession is likely on the horizon, even if we can’t pinpoint exactly when. Founders can’t afford to wait until the midst of a downturn to figure out their game plans; that would be like initiating swim lessons only after getting dumped in the open ocean.
When recession inevitably strikes, it will be many founders’ — and even many VCs’ — first experiences navigating a downturn. Every startup executive needs a recession playbook. The time to start building it is now.
While recessions make running any business tough, they don’t necessitate doom. I co-founded two separate startups just before downturns struck, yet I successfully navigated one through the 2000 dot-com bust and the second through the 2008 financial crisis. Both companies not only survived but thrived. One went public and the second was acquired by Mastercard.
I hope my lessons learned prove helpful to building your own recession game plan.
Fintech startup Revolut lets you earn interest on your savings thanks to a new feature called savings vaults. That feature is currently only available to users living in the U.K. and paying taxes in the U.K.
The company has partnered with Flagstone for that feature. For now, the feature is limited to Revolut customers with a Metal subscription (£12.99 per month or £116 per year). But Revolut says that it will be available to Revolut Premium and Standard customers in the near future.
Savings vaults work pretty much like normal vaults. You can create sub-accounts in the Revolut app to put some money aside. And Revolut offers you multiple ways to save. You can round up all your card transactions to the nearest pound and save spare change in a vault.
You also can set up weekly or monthly transactions from your main account to a vault. And, of course, you can transfer money manually whenever you want.
Metal customers in the U.K. can now turn normal vaults into savings vaults. The only difference is that you’re going to earn interest — Revolut pays that interest daily. You can take money from your savings vault whenever you want.
Revolut promises 1.35% AER interest rate up to a certain limit. If you put a huge sum of money in your savings vault, you’ll get a lower interest rate above the limit. Your money is protected by the FSCS up to a value of £85,000 for eligible customers.
By Andres Ricaurte, Senior Vice President and Global Head of Payments, Mphasis
In the past few years, as fintechs have increasingly come into play on the global stage, not only have they shaken up the way in which traditional business is done – but they also shone a light on the need for significant innovation in the payments space.
For banks and other financial services providers, global payments revenues were $1.9 trillion in 2018, of which half were B2B. The sector represents a significant growth opportunity and is attracting major attention from emerging digital players. One thing is clear – banks and technology players are no longer separate entities but two interchangeable sides of the same coin.
As payment digitalisation continues to take place, how can providers ensure that they adopt technological advancements in 2020 to address some of the industry’s most challenging pain points and create unique angles to stay ahead of the curve?
Planting the seeds for success
Looking back over 2019, we saw B2B payments continue to move towards modernisation, particularly as businesses began to look at their end-to-end processes more holistically, utilise data more effectively, and replace their old systems with more nimble digital solutions.
One of the major trends has been the merging of accounts payable and accounts receivable data, feeding into a growing requirement from customers for a higher level of visibility and control to drive better business decisions. As a result, providers must start taking a wider view that encompasses both of these critical processes, to deliver more meaningful insights and help businesses optimise what have typically been two separate sides of the same coin.
Certainly there have been some teething issues to resolve, such as inconsistent tools and processes for businesses to share information with their buyers and suppliers, as well as associated privacy and cyber security issues that arise from the adoption of more open data frameworks.
While some progress has been made, particularly through the creation of ‘closed-loop’ buyer-supplier networks and ecosystems, there is significant room for improvement. Software and financial services providers alike are finding their feet in terms of capitalising on data to create truly intelligent and context-aware B2B payment solutions.
What other key trends will 2020 bring?
In the year ahead, I anticipate that AI and machine learning will play a huge part in shaping the future of B2B payments. As businesses continue to digitalise payments, invoicing and other trade-related processes, richer and larger data sets will increasingly become available. These technologies will pave the way for real-time data analytics and actionable insights. They will also help drive operational efficiencies through cutting down on the cumbersome (and error-prone) manual labour traditionally used to perform functions like cash flow management and forecasting.
Additionally, SaaS adoption will gain even greater momentum, especially in the areas of treasury, accounting, order to cash, and procure to pay, which will change how corporates consume financial services and choose payment providers.
We will also see major disruption in how employees pay for day-to-day expenses thanks to the rapid adoption of B2B mobile capabilities, new payments form factors and innovative configurations for expense accounts. One of the knock-on effects is that traditional cards and expense reports will start becoming obsolete.
Last but in no way least, digital currencies will remain on the worldwide agenda. Leading financial services institutions and governments alike are evaluating and testing the pros and cons of blockchain technologies in re-designing the money supply chain. Consequently, it’s likely that new use cases for payments and settlements will not just appear, but begin to see early stages of market adoption.
Overall, while progress in payment digitalisation will be different across sectors, geographies and segments, embracing a digital-first, data-centric approach across all aspects of B2B trade and commerce is a must-have for businesses looking to future-proof their operations.