Sydney, Berlin: the new FinTech rivals
BoomTime: Sydney and Berlin are now the hottest FinTech investment destinations
Sydney is tussling with Berlin as a financial technology hub, as the pot of global capital looking for a FinTech home swells fourfold.
The Sydney, Berlin FinTech rivalry surfaced in this year’s Deloitte Australian Mortgage Report which looked into the innovation effect on the local property lending scene as well as more traditional factors like house prices, LVRs and the interest rate outlook.
The report listed five FinTech trends for 2016, among them the question of scale and the growing pot of capital needed to pack on muscle for money technology startups.
There was about $20b invested in FinTechs globally last year with Australia garnering less than one percent of the pie. This year that pie swells to an estimated $88b and both Sydney and Berlin are in the frame to grab more than their share.
"Sydney, along with Berlin, is under the investment microscope as a hot city," the report says.
Berlin, otherwise known as Silicon Allee, has a central European location in the region’s strongest economy, a high proportion of trained-up, English-speaking techs and lifestyle advantages, such as a relatively low cost of living and a super cool nightlife.
Sydney is also long on lifestyle advantages, early lock-out laws aside, has its own strong band of English-speaking techs, and is closer and probably better coupled to Asian financial markets.
But this year could be critical in the long term health of the Australian FinTech sector.
"The very early stage startups, and fintech angel investments in Australia, will have to step up to get to the incubation stage to build sustainable businesses to attract some of this finance," the report says
It’s still early days in Australia, says Delloite consulting partner Chris Wilson.
"Now we have some more formality around Sydney and also Melbourne with the innovation platform the federal government has put in place, it’s an interesting moment in time. We might look back and see that 2015 and 2016 were the years were when it all kicked off," Mr Wilson said.
"What we would expect to see there is more capital. From a fintech perspective its still pretty early. The money will come in – what we need to see is If you talk to a lot of VCs here capital is not the issue. It’s having startups that have moved through the first 12 to 18 months of their life and have moved into the scale up phase. That’s where they want some more smart money," he said.
Deloitte sees potential for local fintech startups in helping develop and implement with big end of town partners the blockchain technology that underpins Bitcoin and is now being researched by traditional financial institutions to massively speed up inter bank settlements.
Blockchain is the generic name for the distributed ledger technology that can instantaneously transfer value through replicated, shared and synchronised digital data spread across multiple sites.
The report says commercial grade scalable blockchain platforms aren’t expected until 2017, but this year should see many blockchain proof of concepts and pilots.
"Australian banks are busy exploring what that will mean to them," says the report.
The report’s other fintech trends for this year were an increase in collaboration between startups and financial institutions, a boost in the regulation technology market as fintech companies made use of their expertise in algorithms and predictive analytics to help with traditional financial institutions compliance overheads and a major boost in predictive analytics startups around the insurance industry.
The report predicted there would be some 100 new insurance startups by year end.
*Photo Credit:David Iliff. License: CC-BY-SA 3.0