Australia is a curiosity in many respects when it comes to digital, dominated as it is by two main centers - Sydney and Melbourne. It is an area ripe for transformation, and there is still a vast expanse for it to grow into. Deloitte have estimated that digital technologies will contribute A$139 billion to Australia’s economy by 2020, a jump of 76% on 2014. It will also account for 7% of Australia’s gross domestic product, up from 5%.
One of the central drivers behind this growth will be a concerted push for FinTech by the government, with a number of new initiatives having been set out to boost the sector. Australia weathered the 2008 financial crisis well, and its ‘big four’ banks - The National Australia Bank, the Commonwealth Bank of Australia, Westpac and ANZ — are considered among the most stable in the world. However, the FinTech market is expected to have a significant impact on their revenues, and is predicted to take a A$27 billion chunk out of them.
David Ball, secretary of Fintech Australia, the national association for the FinTech industry: ‘I think the FinTechs that are really going to challenge the banks are the ones that can create a relationship layer, a layer with the customer, and be the first place customers go for banking advice. Or, what's happening a lot in Europe is a lot of companies are starting digital banks, or white labelling an ADI – so white labelling banks. If I could have my transaction account, my credit card, and my mortgage on my phone, I don't care what bank it's with.’
In KPMG’s global FinTech innovators of 2015, nine Australian companies were listed. A number of new initiatives are expected to see that increase. Firstly, new proposals set out by the Australian Securities and Investments Commission mean that early-stage Australian FinTech startups will soon have access to a new regulatory sandbox allowing financial services startups to trial products or services with real customers for six months without an ASIC licenser. They will have to have a ‘recognized sponsor’ and there will be a $10,000 limit on investment per retail client and a total cap of $5 million, but the scheme should help them to validate ideas far quicker and provides a significant advantage over those in other regions, including the UK’s, which is currently considered the world leader in FinTech.
There was also May’s announcement in the budget that the country’s treasury would partner with its chief scientific organization CSIRO’s analytics subsidiary Data61 to explore potential uses for blockchain distributed-ledger technology. Blockchain gives banks a single shared ledger with a cryptographically secured and agreed history of transactions. It significantly speeds up the ledger reconciliation process, and for a lower cost, which should help banks in particular, tremendously.
Despite this, banks do not appear overly worried. At the Stockbrokers Association of Australia conference, Commonwealth Bank’s CIO David Whiteing told delegates that Australian banks were ‘extremely advantaged’, compared to their overseas peers, with more ‘opportunity to defend’ themselves against FinTech. Whiteing does not believe that any technology thus far has truly disrupted financial services, rather they have been a series of innovations that banks have to incorporate rather than adapt to. This may well be an underestimation on his part, time will tell, but with the government seemingly fully behind innovations in the sector, CBA and the other big four would do well to do everything they can.