One of the most remarkable things about the COVID pandemic is how investors rushed to listed technology equities as panic struck global markets.
Whereas gold has traditionally dominated as a safe haven asset class, the tech buy-up was a striking acknowledgment of digitisation’s inexorable march.
Pandemic or not, in today’s marketplace, disruption is the only constant. The race to become a globally competitive digital economy has never been more hotly contested.
Australia has a stellar reputation as a safe haven assets leader – the world’s first exchange-traded gold commodity, the world’s safest bonds, a steadfast currency. Technology will be no exception.
As the Australian FinTech sector’s first minister, I’ve been struck by how the ecosystem has continued to grow over the past year in what has been a very difficult year for scaling businesses across the economy.
For FinTechs, the headline hurdles during the pandemic were extraordinary. Skittish capital markets. Falling consumer spending and a sharp increase in the discretionary savings rate. Corporate spending reallocated to crisis management. Global labour mobility at a standstill. Stalled interaction with offshore investors and customers. The list goes on.
It’s a real testament to the agility of Australia’s FinTech businesses that their revenue base has held firm, as the recent EY FinTech Australia Census has displayed.
As in any economic shock, pre-revenue firms will always be hit hardest, even with significant economic support measures – Xinja’s aborted launch into banking of course being a high-profile example. Yet we’ve seen those with a revenue-generating product in the market have only increased their global ambitions, with nearly 90 per cent now looking to expand overseas.
To me, this comes as no surprise.
Having spent the past year and a half as the sector’s advocate on the international stage, I have been struck by the exceptionally high regard in which Australian FinTech is held globally for its ingenuity and diversity.
As I told the Singapore FinTech Festival this month, a large part of this attractiveness is our demographic advantage – which makes us an ideal testbed for companies looking to bridge the gap between western markets and the Asia Pacific region.
Australians are digitally and financially literate, and we have excellent financial inclusion, with a banked population of nearly 100 per cent. While we have very similar demographics to much of Western Europe and North America, we also have strong geographical, cultural and economic ties with the key Asia Pacific trading nations.
These are inherent and enduring advantages that, as we emerge from the pandemic, are as strong as ever. For us in the Australian Government, we want to ensure the best infrastructure is in place to build on those strengths – which is why we invested an additional $800 million into FinTech-related initiatives in this year’s Budget.
Coming into the new year, here are three things to look out for in the FinTech space.
First: the Consumer Data Right. This is a world-first platform that will empower consumers to switch to the best products and services for them – not just in the financial sector, but across the economy.
Whether it’s a mortgage or credit card, an electricity or phone bill, the Government has created a system that allows consumers to authorise the transfer of their data to a secure third party – like a competing provider or a comparison app – to make sure that they are receiving the best value for money at any given time.
The Consumer Data Right has already launched quietly this year in the banking sector. As dozens of service providers come online in the coming months, its effects on the competitive landscape will start to be felt.
Secondly: we’ve just kicked off the most significant reform process for Australian payments regulation in over 20 years. This is all about ensuring the payments you make are instant, seamless and low-cost, no matter the context.
Whether you’re making a retail purchase with a card, a QR code or a buy-now-pay-later service, sending foreign currency to family overseas or transferring money to friends, we’re making sure that you can access the world’s best services to do so.
While our instant payments system (the New Payments Platform) is going from strength to strength, much of our payments regulation still needs to be brought into the digital age. We’ve got the ball rolling with the impending introduction of Stored Value Facilities – a new regulatory class for payments providers, administered by the prudential regulator APRA – and are following this up with a whole-of-system review due to conclude in April.
And finally: the new FinTech Regulatory Sandbox, which we launched in September. This allows FinTech firms to introduce a new product into market for up to 24 months, in a safe environment, before needing to apply for financial services or credit licences that can be costly and complex for a startup to obtain.
With the first entrants in this sandbox launching over the coming months, you can expect to enjoy more diverse and innovative services in Australia than ever before – from lending to robo-advice, insurance to investment, and much more.
I’m very excited about what is in store for this burgeoning ecosystem: one that the Prime Minister and Treasurer see as front-and-centre of the economic recovery.
As normality gradually resumes, traditional safehaven assets like gold have started to decline. But for Australian FinTech, we’re making sure the sky’s the limit.
Senator the Hon Jane Hume is the Assistant Minister for FinTech