October 7, 2014
Source: Australian Financial Review
Author: James Eyers
The federal government must do more to foster the thriving financial technology industry in Sydney, which could become a big contributor to the national economy but risks withering on the vine as tech savvy workers are lured abroad by tax breaks.
A report by KPMG and think tank the Committee for Sydney, which will be launched by NSW Deputy Premier Andrew Stoner on Tuesday, calls for governments to create a comprehensive vision for fintech while promoting Sydney’s capability in the sector throughout Asia-Pacific.
A not-for-profit physical hub should be established in the CBD to allow start-ups, venture capitalists, researchers and established financial services firms to collaborate, the report says. It also calls for an independent fintech industry association to be set up, and for universities to step up research on opportunities for Sydney, given its financial services proficiency and deep workforce of information, communications and technology (ICT) professionals, along with its other creative and professional service industries.
The report presents a call to action to ensure Sydney capitalises on a growing global trend. The fintech scene is expanding rapidly in world financial centres, with financing activity predicted to rise from $US3 billion($3.5 billion) t to $US6 billion to $US8 billion by 2018, according to Accenture. Fintech firms operate in areas including personal finance, big-data analytics, payments, capital markets technology and office tools. The movement is being driven by the digitalisation of financial services, big data, falling computing costs, technology innovation and banking customers’ embrace of mobile devices.
The Committee for Sydney/KPMG report says for Sydney to succeed in fintech, financial services and technology talent needs to develop a more entrepreneurial mind-set and be supported by government, business and seed and venture capital funding.
The report uses Britain’s whole-of-government approach as an example of what can be achieved quickly: 44,000 people are working in fintech firms in London after a government strategy was put in place 18 months ago to aggressively promote London to the global digital diaspora.
UK Trade & Investment is targeting entrepreneurs in Sydney to go and work to Britain by granting tax relief and subsidies. The Committee for Sydney-KPMG report says public-private co-operation is crucial to give Australian fintech the best chance to compete. “We don’t want to leave anything to chance,” says Tim Williams, the CEO of Committee for Sydney, which is chaired by Lucy Turnbull and received funding from the NSW government for the report.
“We must harness the potential of Sydney’s financial services industry but we need alignment between government and the sector to ensure it succeeds. We need partnership with government as that is what other countries are doing,” Dr Williams said.
Sydney has a total of 950 start-up companies but only a small amount of these are in fintech, the report says, pointing to several factors holding the sector back. These include limited venture capital funding, uncompetitive tax settings, and limited participation by established firms in fintech through either accelerators or VC (Westpac’s investment in VC fund ReinventureGroup is an exception).
KMPG prepared the report after interviews with fintech entrepreneurs, including Ben and Toby Heap, from investment company Australasian Wealth Investment. The brothers say a single new success could provide a big lift to the fintech ecosystem in Sydney, highlighting accounting software company Xero in New Zealand, which spawned another 20 to 30 start-ups in Wellington. “New Zealand is now doing better in early stage fintech than Sydney or Australia more broadly,” they say.
Wealth management platform Bravura Solutions, foreign exchange platform OzForex and payments provider Tyro are examples of well-established fintech companies operating in Sydney. Newer start-ups include peer-to-peer lender SocietyOne and online financial adviser stockspot.
“No one can to predict which specific tech or business models will be winners or losers from new technology, or determine their implication on the industry,” says Ian Pollari, KPMG’s national sector leader for banking.
“So our focus should be on fostering a collaborative environment, allowing entrepreneurial activity and innovation from fintech starts-ups and more established institutions to flourish.”
To read the article online go to the BRW website here.