Australia wants more fintech opportunity despite surprisingly low budget commitment

Australia’s federal budget has a surprisingly low financial commitment to fintech, despite the country’s clear appetite for developing the sector

Australia wants to become a global financial technology (fintech) centre, but the level of funding for promoting the country’s fintech abilities is surprisingly low in the federal government budget.

Fintech is a big opportunity, with around A$20bn invested in fintech globally in 2015 and an estimated $88bn headed for the sector in 2016, according to a recent report from Deloitte.

The Deloitte Australian Mortgage Report said Australia garnered less than 1% of the global fintech investments. But it added that the country, in particular its biggest city Sydney, could attract a much larger share.

“Sydney, along with Berlin, is under the investment microscope as a hot city,” the report said.

The report devoted significant space to financial technology issues, as well as the usual analysis of interest rates, lending trends, housing demand and building activity. The report predicted there could be 100 new Australian startups in the insurance fintech sector alone by the end of 2016.

In the fintech capital contest between Sydney and Berlin, the German city is located at the heart of Europe’s strongest economy, has plenty of skilled and English-speaking people in technology and lifestyle advantages. Sydney also has lifestyle advantages, English-speaking techs on tap and is close to Asian financial markets.

Despite this, the federal government’s 2016 budget, released on May 3 2016, doled out just A$200,000 to promote Australia as a great place to buy and develop fintech.

Finance technology at least got a mention in the government’s glossy overview of the 2016 budget, which it hopes will help it win the upcoming double dissolution election on 2 July 2016.

For example, under the heading “Investing in the ideas boom”, the federal government’s budget overview said the government technology research and commercialisation arm Data61, which sits inside the CSIRO, would study and pilot test blockchain technology.

Also, the Australian Securities and Investments Commission will assist fintech startups by creating a regulatory sandbox where ideas could be tested with clients without necessarily running foul of outdated financial regulations.

Read more about fintech in Australia

The A$200,000 to promote Australia’s fintech prospects internationally did not get a mention in the overview, instead it was buried deeper in the budget papers. The amount appears to be just enough to employ a fintech spruiker as some sort of trade envoy for a year and pay their travel costs.

But treasurer of Australia Scott Morrison talked up the sector’s prospects in a budget statement. “A strong and vibrant fintech industry will play an important role in the transition underway in Australia’s economy,” he said.

Growth of fintech in Australia

Australia’s prospects as a fintech power appear solid. There are a number of specialised fintech hubs, including Tyro and Stone and Chalk in Sydney. 

Research by Frost & Sullivan predicts the local fintech sector will grow by more than 76% a year until 2020, at which point it will be worth A$4.2bn.

The Deloitte report said it expected partnerships between local financial institutions andfFintechs to rise in 2016. It said there would be many blockchain pilots and proof of concept projects this year, with commercial grade, scalable platforms arriving in 2017.

Meanwhile, regulation technology driven by fintechs armed with algorithmic and predictive analytics smarts will begin to help finance institutions and large companies lessen their compliance overheads in areas such as unearthing money laundering.

Speaking at the launch of the Deloitte report in April 2016, Deloitte partner Chris Wilson said this year could be the tipping point for Australia’s fintech future. “It’s an interesting moment in time. We might look back and see that 2015 and 2016 were the years when it all kicked off,” said Wilson.

Read more on IT for financial services

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