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Fintech growth rates explode in Australia

Financial technology companies in Australia are growing at high rates and come as a warning to the nation's enterprises that are yet to join the digital revolution

It took a growth rate of 6,971% for financial technology (fintech) business Prospa to be crowned winner of the 2015 Deloitte Australia Technology Fast 50 award.

This was almost double that achieved by the winner of the awards in 2014, when datacentre designer NEXTDC took top slot with a 3,626% growth rate.

Prospa is an online lender, providing funding for loans to small businesses, generally worth $5,000 to $250,000. It is considered a serious disruptor.

Speaking at the recent Australian Computer Society’s Reimagination conference in Sydney, Telstra’s chief scientist, Hugh Bradlow, warned that it wasn’t so much the disruption that was a challenge for entrenched businesses – but the speed of change. This would only accelerate, he said, predicting there would be exponential technology development to deal with over the coming decade.

“If you get it wrong you are 100% off the pace and there's no catching up from that,” said Bradlow.

Financial services is just one of the global industry sectors being rapidly transformed by innovative application of technology to create new products and services.

Craig Dunn, former CEO of AMP, now a director of Westpac and chairman of fintech incubator Stone & Chalk, also presented at Reimagination. He said it was important enterprises looked outside their perimeter for inspiration and ideas.

“No company can innovate alone – why would any business assume they have all the smart thinking? That’s why innovative ecosystems are becoming more important,” said Dunn.

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A recently released report from Accenture and the G20 Young Entrepreneurs Alliance said enterprise adoption of digital technologies could add AUD34.5bn to Australia’s gross domestic product (GDP) by 2020. However, the report was less effusive about the nation’s track record in terms of forging the sort of collaborative innovation ecosystems that Dunn recommends.

David Mann, managing director of Accenture Strategy, said that large enterprises and startups would both benefit from closer relationships than were currently in evidence in Australia. He said that initiatives such as Stone & Chalk which brought together established players, startups, researchers, seasoned business people and investors were examples of the possible.

Besides supporting greater sectoral collaboration, Dunn also stressed the importance for Australia nationally to have a well regulated financial system; leading financial institutions which were deeply engaged with the change agenda; deep talent pools; strong universities; and research and communities that embrace innovation.

In a November 2015 letter to the federal government, which is currently finalising its innovation agenda for Australia, 34 fintech startups and incubators outlined what they also identified as challenges and opportunities for the nation.

The letter notes that in 2014 $12.2bn was invested in fintech globally – 205% more than the year before. “Australia with its relative strength in financial services is well placed to seize this opportunity but also has a lot to lose if we do not set up the correct policy environment to harness this disruptive wave,” it said.

To ensure the country has the best opportunity to become a regional fintech leader, the coalition of companies recommends a series of reform. These include the introduction of fast-tracked licences for startups; legislative reform to allow equity crowdfunding; tax incentives to encourage investment in startups; a requirement for financial institutions to open their application programming interfaces to allow more effective data sharing; and inclusion of bitcoin and other digital currencies within the Australian authorities’ definition of money rather than goods.

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