High above Canary Wharf in London – on level 39 of One Canada Square to be more precise – is an office space carving out the future of financial services.
With spectacular views of the Thames, Level39 provides players in London’s burgeoning fintech industry with creative space. Offices or desks are hired for monthly fees, and various modern shared spaces allow for networking and collaboration.
From ACE Consensus (a markets data company) to Zapnito (a collaboration platform), various start-up companies traversing software, artificial intelligence, trading platforms, P2P lending and crowdfunding and app development are working on Level39. This crew is seeking to cut out the middleman.
Working in an incubator like this also provides access to funding opportunities and an understanding from banking incumbents about their technology needs: venture capitalists and managers from traditional banks swirl around Level39.
Tenants also benefit from mentoring programs, pitching workshops, hackathons and seminars on tech industry issues. Companies from Europe are also moving in, boosting London’s standing as a global financial centre. So fast is it growing that Level39 has taken out entire 42nd floor of the same building.
“The idea behind Level39 was to create a place that is somewhere between a bank and Facebook and Google,” says managing director Eric Van der Klei j on a slick YouTube promotional video (the comment is made to thumping dance music). “Because it had to be a place where it was comfortable for the banks’ senior executives to be – not to be frightened away because it was too funky for them – and it also all had to be really comfortable for innovators, the geeks, to come and want to hang out and bump into the innovators and investors – as well as the banks that they want to talk to.”
Conservative Member of Parliament Damian Collins , who is British Prime MinisterDavid Cameron ’s business ambassador for South East, says: “The growth in the economy is being built on the development of these clusters. People need to be in creative environments working along side people doing something similar, people they can learn off and share ideas with.”
So, when will a Level39-style operation arrive in Sydney?
Support for Knowledge Hubs
The think-tank Committee for Sydney has been working with NSW Trade and Investment to help birth a prospering fintech hub in Sydney to rival those being developed in London, New York, Tel Aviv and Singapore. The NSW government is supporting the development of “knowledge hubs” across the economy bring together established players, start-ups, technology, government and regulators. Andrew Low of Redbridge Grant Samuel is chairing the financial services knowledge hub.
The NSW government has provided seed funding to the Committee for Sydney, which is chaired by former Lord Mayor Lucy Turnbull and co-chaired by Macquarie Group deputy chair Craig Pudig, to develop the vision. KMPG chairman Martin Blake also sits on the board of Committee of Sydney, which turned to KPMG’s national banking sector leader Ian Pollari and director of financial services James Mabbott, to prepare a report on fintech in Sydney and the policy reforms necessary to accelerate it in the Premier State.
KMPG’s report will be launched on Tuesday morning by Deputy Premier Andrew Stoner , as the NSW government seeks to position financial services for new markets and global growth.
It is understood that one of the half-dozen recommendations of the report will be to create a physical space – a local Level39 – to house in the CBD the growing ranks of tech start-ups, an incubator that can foster innovation, encouraging new entrepreneurs to build businesses.
The report will also call for the federal government and its regulatory agencies to freshen tax settings, incentives, and regulations and more pro-actively attempt to attract foreign entrepreneurs to set up in Sydney.
Expectations for Prime Minister Tony Abbott ’s innovation taskforce are growing higher by the week, as the start-up community grows increasingly desperate for a clear indication that the government is on board with their vision to mould Australia’s digital economy.
Technology entrepreneurs have been urging the Abbott government to follow through on promises to end the up-front taxation of employee share options, which have hampered tech start-ups from using options to attract talent instead of paying high salaries in their early years, meaning local companies are fighting for global talent with one hand tied behind their back.
A Reason for Envy
Australian fintech businesses (which include SocietyOne, stockspot, VentureCrowd, Quantium, mint, tyro, OzForex, bravura solutions and ReinventureGroup) can only look on in envy as the British government led by Cameron and Chancellor of the Exchequer George Osborne provides unequivocal support for the blossoming of fintech in London.
The British government has committed more than £100 million ($184 million) to fintech firms through the British Business Bank. A new industry body, Innovate Finance, is promoting the interests of the British fintech sector in Westminster and Europe. Cameron’s government has also set up the Financial Services Trade and Investment Board to promote bilateral trade and move to untie any red tape restricting the fintech industry from reaching its true potential. Direct engagement with fintech players is commonplace place. The UK Foreign Office is even sending trade representatives abroad (including to Sydney) to poach promising fintech start-ups by persuading them to relocate to Britain (and pay taxes to its government).
The British government has ensures the country’s regulators are not restricting fintech potential. A “side door” to market and banking regulators has been created to fast-track regulation, which allows start-ups to reach the “minimum viable product” as seamlessly as possible. The plethora of financial services regulation is one of the big barriers to fintech firms getting off the ground.
“The time has come for radical transformation of the financial services industry,” said Innovate Finance’s chief executive Claire Cockerton at the body’s August launch. “Whether you are a consumer, banker or young entrepreneur, we all see enormous potential for innovation and growth in the financial services sector.”
According to this year’s Accenture CB Insights report, amid the boom in global fintech investment, Britain received $US3 billion ($3.5 billion) of fintech investment in 2013 while the sector is experiencing exponential growth around the world.
The report predicts financial activity will increase to the range of $US6 billion to $US8 billion by 2018.
The Committee of Sydney and KMPG report will highlight the pace of change in the global fintech landscape and say Australia is already playing catch-up.
Unless Australia implements an overarching strategy bringing together tech companies, banks, government, investors, academics, and policy makers, then not only will opportunity be lost to London, New York, Tel Aviv and Singapore, but also San Francisco, Dublin, Berlin, Hong Kong and Auckland.
Greater collaboration is crucial to bring a fintech vision for Sydney into reality. And a thriving fintech industry is a prerequisite for Sydney to describe itself as a modern financial centre.
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