There’s a revolution happening in financial services as a rapidly expanding fintech sector – tech-powered startups plying loans, payments, personal finance, wealth management and business solutions – looks set to lure customers away from banks and other established players. Danielle Szetho, CEO of peak body FinTech Australia, is ahead of the charge. By Deborah Tarrant.
How big is Australia’s fintech sector?
For a country of 24 million people, the growth in the number of fintech companies has been outstanding. When we conducted our first fintech census in late 2016, we found between 200 and 300 companies operating in the space. Twelve months on, that number has doubled. Companies are starting up every day.
Where’s the focus of Australian innovation?
Australian fintechs are moving fast in key areas, including blockchain technology [software that creates a secure shared digital ledger of transactions and records], with growing interest in collaboration coming from China, the world’s blockchain leader. Some, such as AgriDigital [which facilitates faster payments and trust between buyers and sellers of agricultural commodities], have emerged in less expected channels such as supply chain management. Australia also has some very successful artificial intelligence and machine-learning companies. The data and regtech [regulatory technology] space has some fascinating companies, too, with leading approaches that balance user experience with privacy protection.
What’s the likely extent of the disruption?
The incumbent financial community will be most disrupted, particularly in Australia, where 80 per cent of banking services is concentrated in the big four banks. The greater risk is from big digital players – like Amazon, Alibaba or Tencent – coming into the Australian market to compete in financial services. This could pose a threat to the national economy if fintechs and banks don’t collaborate. If that happens, the revenues that the banks are pulling in, which are currently redistributed to the Australian population through dividends and profits from superannuation funds, may go offshore.
How do we guard against that?
Collaborations between established players and the startup community are vital. Of course, it’s difficult to completely change your business and some have rusted-on behaviours and are not used to working with these new technologies. The Federal Government’s commitment to an “open banking” regime will force the banks to stop blocking the sharing of data with others and make them think about working more with fintechs. There are encouraging signs.
What are some of the biggest challenges facing the fintech sector?
One is gender diversity. Financial services has a poor record of strong female participation and technology is worse, especially at senior levels. Another challenge is the speed of policy change. Technology moves fast and policy lags.
What does the future look like?
In 2018, Australia will really step on the world stage as a fintech power. Our 2017 census revealed a major uptick in Australian companies planning to expand overseas. At $US610 million [about $809 million], Australia is already the Asia-Pacific’s second-largest alternative finance market. China is the global leader but we’ve leapfrogged Japan – and that was before we had a crowdfunding framework. Now that we have one, the future looks spectacular.
Photo-illustration: Johnson Andrew