From Sydney to Singapore, fintech is becoming an essential part of everyday life. Australia now has the opportunity to capitalise on this revolutionary industry and propel itself forward as a global fintech leader.
Down Seng Poh Road people elbowed their way through the rambunctious crowd. The distinct smell of pungent spices, steaming hot broth and sticky barbeque glaze emanated from Ms Sooks stall. Ms Sook, an adroit cook, famous for her family’s chicken rice, frequently brought upon a lively assault on her customer’s tastebuds. This was undoubtedly a culinary and cultural experience that could only be found at one of Singapore’s iconic hawker centres.
However, hawker centres have long been a bastion of hard cash. Luckily, Ms Sook has had the luxury of not having to deal with counting wads of cash, handling money with her greasy hands or even fiddling around with change. Her customers now pay through a touch of their phone, allowing Ms Sook to focus on serving her famous chicken rice to the hordes of hungry customers.
Ms Sook has benefited from unprecedented fintech innovation and development and now has the opportunity to increase her sales by upgrading her equipment through a micro-loan. Through Grab, she can receive money without the time investment and complexities accompanying bank loans.
These services are driven by non-bank entities that have shaken the foundations of traditional banking systems and caused a radical shift in the financial services landscape.
Fintech, short for financial technology, encompasses any company utilising the internet and software to perform financial services. Fintech acts as the great leveller between small firms and large corporations. Fintech now allows David to compete with Goliath.
Digital disruption in financial services is changing the world and will continue to do so. Australia has a golden opportunity to position itself as a major fintech hub in the Indo-Pacific, accelerated by increased cooperation with, and learnings from, Singapore.
We are now in the Asian Century. Over the next 30 years, 1.8 billion people will move into cities. Indo-Pacific countries are expected to experience the largest middle-class growth and demand for technology-driven innovation alongside a comparatively young population of ‘digital natives.’
Australia, as a part of the Indo-Pacific, has seen its fintech sector grow from AUD800 million in 2018 to just under AUD2 billion last year.
Australia benefits from having a transparent market, sound regulatory regime, and an independent judiciary while boasting a 25 million population providing a skilled workforce.
The Australian economy (AUD1.9 trillion) is four times larger than Singapore’s (AUD470 billion), making Australia an attractive destination for foreign fintech investment. However, Singapore is still regarded as one of the world’s major fintech locations, ranking fourth on the Global Financial Centres Index, while Sydney ranks 13th.
Singapore is one of the most established capital markets in the Indo-Pacific. The nation serves as a global fintech hub and a gateway into the ASEAN region. Singapore’s vibrant start-up ecosystem, supportive government and business-friendly tax regime have turned the country into an ideal fintech start-up environment. Talent will gravitate to where opportunities for innovation are abundant; Singapore is that place.
Compared to Singapore, Australia lacks seed funding and a tax regime conducive to fintech innovation.
Australian fintech start-ups face difficulties accessing seed and early-stage funding, exacerbating their ability to further develop. Australia’s largest matching fund, the Accelerating Commercialisation grant, offers up to AUD1 million of matched funds for Australian entrepreneurs. Contrarily, the Monetary Authority of Singapore recently announced a AUD180 million fund to help accelerate innovation and technology in the financial services sector. The investment was supported by Singapore’s 1000 fintech companies, 40 innovation labs facilitating 500 projects last year alone.
The Australian government needs to consider expanding the scope and size of its fintech investment. Particularly, for matching funds for seed financing ventures, whilst establishing fintech innovation labs.
Why would any entrepreneur want higher taxes?
Ultimately, Singapore does everything Australia does, but better! Instead of viewing Singapore as a threat, Australia needs to view Singapore as an inevitable ally, one that we can complement. Australia has similar demographics to both Europe and North America, making us ideal testing grounds for Asian fintech’s wanting to enter Western markets.
Nevertheless, Australia doesn’t have it all wrong.
ASIC’s regulatory sandbox allows eligible fintech companies to test certain products and services for up to 12 months. The sandbox is designed to allow businesses to test business models and evaluate the commercial viability of their projects, before incurring significant compliance costs.
Furthermore, steps have been taken to further strengthen relationships with Singapore through the Digital Economy Agreement, helping create regulatory framework between the two nations, and the Cooperation Agreement aiming to assist Australian and Singaporean fintech businesses expand into each other’s market.
As the humble Ms Sook understood and appreciated the abundant opportunities fintech brought her, it is time that Australia deeply considered this lesson too.