Australia: One of the Fastest Growing FinTech Markets and a Gateway to South Asia
By Elena Mesropyan for LTP
The most recent estimates suggest that the Australian FinTech industry generated $180.2 million in 2015. By 2020, the Australian FinTech revenue is projected to grow at a CAGR of 76.3% and exceed $2.92 billion, driven by reduced taxes on investments in startups, a steady increase in mobile payments and the rise of tech-savvy digital natives.
Digital payments, personal and business finance, financial infrastructure, data analysis, cloud computing and mobile technology are some of the hottest segments in Australian FinTech. One of the factors that will contribute to the growth of the Australian FinTech industry is the appetite amongst the general population to try new financial technology. Australia was the fastest nation to take up contactless card payments on a large scale along with a heavy usage of smartphones.
Moreover, Australia has made the most progress amongst developed nations with regard to reducing the usage of checks. Australia has become known in many multinational businesses as a good market to test out and refine new ideas in technology.
The Australian government is very supportive of national FinTech – among other initiatives, at the end of February 2016, PM Malcolm Turnbull announced the establishment of the FinTech Advisory Group to support the goal of making Australia one of the world’s leading markets for financial technology innovation and investment. In 2015, Australian Security and Investments Commission (ASIC) established an Innovation Hub, streamlining its engagement with the FinTech sector and removing red tape in lieu with its deregulatory agenda.
In addition, the authorities are taking steps to facilitate venture investments in the national FinTech industry – the government ensures that FinTech and InsurTech startups can be eligible investments for the purposes of the venture capital tax concession. It allows access to the incentives for venture capital investment including those available under the NISA, encouraging investment in FinTech. Early Stage Venture Capital Limited Partnerships (ESVCLPs) are investment vehicles that provide tax exemptions for those investing in innovative companies at the early and growth stages of a startup.
Australia is now ahead of the world with testing and implementation of distributed ledger technology: at the beginning of December 2016, Sydney-based AgriDigital (integrated, cloud-based platform that seamlessly manages contracts, deliveries, invoices, payments and inventory) has successfully executed the world’s first-ever live settlement of a physical commodity on a blockchain between a grower and a buyer. During the pilot, the AgriDigital SaaS platform was connected to a multi-node private Ethereum blockchain network. AgriDigital managed the nodes, acting as operator, buyer, and regulator to create an example of the ecosystem that will occur in the future. Moving into 2017, AgriDigital plans to execute a similar pilot within the Canadian grains industry.
Earlier, in September 2016, Australia was appointed to the position of the secretariat for the international technical committee by the International Organization for Standardization (ISO) to lead the blockchain standardization project. Alan Tsen, Blockchain Subcommittee Lead for FinTech Australia said, “This is a great boost to the local ecosystem and allows Australia to lead an important piece in developing standards for blockchain technology.”
The analysis of global FinTech hubs puts Sydney among the top 10 hottest hubs with excellent opportunities for FinTech entrepreneurs. Sydney is among the limited number of hubs that score ‘Good’ and ‘Excellent’ marks for such indicators as mentioned earlier with government support, innovation culture, proximity to customers, proximity to expertise, foreign startups and regulatory environment.
The analysis reveals that Australia has robust wealth management and superannuation sectors and holds the lion’s share of the customer base in its region. It is the gateway ecosystem into Asia, especially South Asia with many global banking brands setting up their Asian headquarters in Sydney. There is a deep and skilled talent pool with high levels of mobile penetration and Internet banking. The Australian government is working on extending its ties with Asia and experts expect there to be more Asian companies setting up offices in Sydney and vice versa.
First appeared at LTP