The Australian FinTech Ecosystem’s Growth is Breathtaking

Continuing our world FinTech haul after looking at London, New York, Hong Kong, Singapore and other international FinTech hubs, we decided to take a closer look at the Australian FinTech ecosystem. Recently, Aussie banks and investors have demonstrated a passionate interest in exploring opportunities with FinTech, which worth taking into consideration if you are looking for international expansion.

Last year, one of Australia’s oldest banks, Westpac, invited a bunch of youngsters to pitch their ideas at a Shark Tank-style event on how to make financial services nimbler, cheaper and friendlier using ­digital technology. The fresh-faced disrupters who turned up in a Sydney skyscraper included a policeman from China, a South African ­cybersecurity expert and a couple of local staff from Google and IBM, as WSJ reported. A year earlier, Westpac also made a generous investment of $50 million into technology-focused venture capital fund Reinventure.

The team presented its business plan to dominate the niche banking market for newly arrived migrants in Australia via social media, mobile apps and push notifications. Brad Lorge, the team’s 23-year-old cyber expert, shared, We’re the generation that never knew the world without the Internet. We’re trying to reframe how banks work.

As Westpac’s Manager who co-hosted the FinTech pitch session, Damien MacRae commented, We want to know what we’re not seeing. We need to think and act like a 200-year-old startup.

According to WSJ, Australia in 2014 was on the third place by the investment fund assets size with $1.6 trillion ready to fuel the ecosystem. There are other interesting details about Australian FinTech proving the forward-thinking culture of the financial industry. For example, according to Westpac, contactless payments via mobile were estimated at AUD $3 billion in Australia last year. Mobile-based contactless payments have accounted for 60% of all debit card transactions in the past in 2014.

In 2014, George Lawson, Visa Australia’s Senior Director for emerging products and innovation commented on the Australian contactless payments market, At the moment, we’ve got 47% of our face-to-face payments that are contactless in Australia. Nearly one in two presenting their card at a point-of-sale is from a contactless perspective. So there has been a phenomenal uptake when you think about it in that context, and Australia is leading the world in terms of this level of contactless. We have 51 million contactless transactions per month, so it’s well and truly gone beyond that tipping point; consumers are now essentially expecting that kind of contactless experience at the point-of-sale.

The same year, Swift, a Belgium-based company also known as Society for Worldwide Interbank Financial Telecommunication system, started building a new network in Australia called the Australia New Payments Platform, which is expected to go live in 2017. NPP consists of ANZ, Australian Settlements, Bendigo and Adelaide Bank, Citi, the Commonwealth Bank of Australia, Cuscal, Indue, ING Bank (Australia), Macquarie Bank, National Australia Bank, the Reserve Bank of Australia and Westpac Banking Corporation. The New Payments Platform is a major industry initiative to develop new national infrastructure for fast, flexible, data-rich payments in Australia. In August 2015, the program proceeded to the fourth phase.

An example of the impressively emerging Australian FinTech is the fact that 14% of more than a billion dollar raised by FinTech around the world in December 2015 were raised by Australian FinTech startups. Interestingly, they represent just 5% of all startups that raised funds at the time. In fact, Australia has the third-biggest fund-management industry in the world, according to WSJ.

It is worth mentioning that a team of computer engineers from the Commonwealth Bank of Australia have built a working blockchain in their innovation lab in Sydney which will be used to show regulators how blockchain might be used to reduce risk and costs of making international payments or other applications. Many banks feel they can reduce, or eliminate altogether, various costs by adopting some sort of common shared ledger and let that proliferate through the industry, commented Tim Swanson, Head of Market Research at R3 CEV. He also added that the technology could also assist regulatory monitoring for systemic risks in financial markets. It is possible that by easing the way for blockchain adoption with regulators, the Commonwealth Bank is looking to pave its own way with blockchain technology.

Last year, the Commonwealth Bank also launched its open-source mobile payments platform called Albert in its innovation lab in Sydney, which uses the startup model to act as an idea incubator and accelerate innovation.

Australian government also takes attempt to attract capital and investments to the country by allowing foreigners to stay in the country permanently if they invest at least AUD $500,000 from a total AUD $5 million investment in Australian companies into venture-capital or private-equity funds supporting growth startups in the country.

US FinTech startups and investors are also keeping an eye on the Australian market. During mid-2015, Silicon Valley-based trading platform Robinhood chose Australia as the first international market to launch.

In September 2015, former Quantitative Analyst Sid Sahgal and Research Analyst at Bank of America Merrill Lynch launched their startup called Macrovue, Australia’s first online platform that helps to invest in global themes. Based in Sidney, they plan to divert more of Australia’s roughly AUD $2 trillion pool of funds under management into US equities via an electronic-brokerage and stock-research service that charges a fraction of what retail investors typically pay brokers, as stated by WSJ.

Clearly, the Australian FinTech industry is a powerful machine that will surely shake up international markets. Let’s look at some of the interesting FinTech companies of different sizes operating in Australia.

This is certainly not an exhaustive selection of startups as Australia's FinTech ecosystem is actively developing with new international startups expanding their operations in the country as well as new ones being launched in incubators and accelerators. Another part of Australia’s FinTech ecosystem consists of investors, events, incubators/accelerators. We have selected some examples of accelerators and incubators that can significantly boost FinTech startups chances for success:

Tyro FinTech Hub is Australia's first dedicated space for FinTech startups and entrepreneurs in the heart of Sydney's financial district. According to the official website, Tyro itself is one of Australia’s great FinTech success stories; it has set aside an entire floor to give back to the community and to encourage new generations of FinTech entrepreneurs. The FinTech Hub provides a place where founders work and collaborate, companies are incubated, accelerators are run, mentors contribute, experts teach, investors discover and the ecosystem meets and networks.

Stone & Chalk is an independent, nonprofit FinTech hub whose objective is to help foster and accelerate the development of world-leading FinTech startups. As stated on the official website, it is a physical center of gravity for the local FinTech ecosystem. Stone & Chalk aims to attract and support the growth of the highest quality FinTech startups in Australia, from the full spectrum of the FinTech landscape (payments, peer-to-peer, crowdfunding, automated advice, capital markets, cryptocurrencies, etc.). The hub has AmEx, IBM, Oracle, HSBC, ANZ and others among its partners. FinTech companies like NexPay, Neu.Capital, Piggy, Physi Secure and others are part of Stone & Chalk’s portfolio.

AWI is an investment company listed on the ASX. The company focuses on the financial services sector. AWI is looking to hold equity stakes (up to 100%) in operating businesses in four core thematics: digital distribution; research & information; funds management; and trustee & super services. AWI will also invest selectively in early-stage businesses through AWI Ventures where these businesses complement our core operating businesses. Each of the businesses the company invests in operates under distinct brands rather than a single corporate identity. AWI expects to take advantage of new technology and disruptive product & service innovation in its various businesses and investments.

Sydney FinTech Meetup welcomes all FinTech people (established and startups), and those in established financial services organizations. Every month, they debate and discuss how FinTech is disrupting traditional financial services—from P2P lending, comparison websites, robo-advisor wealth managers, to bitcoin and cryptocurrencies. According to the official website of the meetup, FinTech could take 20-30% bank revenue in the next three years, which is a $25-billion opportunity for startups.

Pollenizer builds incubation and acceleration programs that help entrepreneurs and big companies all over the world get started with high-growth, tech-powered businesses. The company calls it startup science. As Australia's first digital incubator, Pollenizer has developed the experience and expertise as well as a powerful network of contacts across the Asia-Pacific region to guide startups and large corporations in their journey to innovation and success.

Ignition Labs is Australia's first niche seed accelerator program for early-stage technologies, which draws experience from a pool of mentors, each with entrepreneurial experience, skills and experience in the health & medical technology industry, or a significant health technology industry network. Mentors provide sage advice and get their hands dirty when projects need a boost, as they promise. Among the program’s sponsors are UK Trade & Investment, Brandon Capital Partners, British Airways and others.

ATP Innovations claims to be Australia’s leading incubator that partners with technology-based startups and entrepreneurs to help them grow, achieve success and find investment through the support of personalized assistance and mentoring. The incubator’s executive team has worked with more than 80 businesses over the last several years, helping them raise over $150 million, sell products across the globe as well as sell their businesses.

Startmate is a network of founders offering mentorship and seed financing to technical teams creating global Internet startups from Australia. The mentors have extensive experience growing successful tech businesses (such as Atlassian Co-founders, Mike Cannon-Brookes and Scott Farquhar). Over 200 startups from across the country apply each year and 25 of these are shortlisted for interviews. Out of these, Startmate chooses eight. Startmate’s 30 mentors invest their own money into the startups: $50,000 initially in each of the eight companies for 7.5% and then a further $100,000 after working with the teams. Of the 37 companies who have been a part of the program up until the 2015 intake, half have raised an average of US$1 million in seed capital at an average valuation of US$4 million.

Excelinc is Australia’s Startup school for entrepreneurs. It’s a place to come and build your own business with the help and tutelage of their experienced mentors while gaining a formal qualification. This qualification and the credits entrepreneurs earn can then be used as a pathway, with advanced standing, to University in the future. Excelinc is looking for early-stage ideas from a range of industries (IT software/hardware, financial technology, P2P, sharing economy, childcare construction, trades, hospitality, etc.) for its 12-month program. The school-incubator takes batches four times each year with a $20,000 investment, mentors, access to interns, roadshow to Silicon Valley (USA), working space and in-house support (graphic design/ admin support/ accounting).

iAccelerate is a University of Wollongong (UOW) business incubator program aimed to help entrepreneurs to build and grow businesses. iAccelerate is built around a robust educational program, formalized business acceleration monitoring and one-to-one mentoring. iAccelerate offers innovative businesses an opportunity to partner with a university comprising over 30,000 students, 2,000 staff and a significant portfolio of faculties and business units. UOW activities generate over $2 billion in economic activity each year. Incubator offers a two-stream program with up to a three-year incubation period.

River City Labs is a co-working community of like-minded individuals who come together to promote and develop early-stage and startup businesses and entrepreneurial activity in the mobile, Internet, telecoms and technology sector in Brisbane and its surrounding regions in Australia.

The list is not exhaustive as there is a wide range of hubs supporting the FinTech community in Australia. Some other interesting accelerators/incubators and spaces are BlueChilli, muru-D, AngelCube, The York Butter Factory, STC, ilab andStartup Victoria.