Australia is one of the world’s top five leading global fintech markets, with one in three digital consumers using fintech technologies, according to a report from Ernst and Young released this week.
The report saw Australia rank fifth in the world for adoption of new financial services technologies, with a 37% consumer adoption rate. This places Australia behind China, which has a 69% adoption rate for fintech services, then India, the UK and Brazil. The global average rate of adoption is 33%, with the US sitting right on that average figure.
The rate of fintech adoption in Australia has grown significantly in the two years since the first report was released in 2015, when it sat at a low 13% adoption rate: this represented one in seven digital consumers.
Since then consumers have embraced fintech technology, particularly in the money transfer and payment services which were utilised by 50% of all fintech users in the last six months.
Ernst and Young FinTech advisor Meredith Angwin notes the sector is “gaining widespread traction, both locally and globally, and has achieved the early stages of mass adoption in most countries”.
The startup ecosystem has capitalised on this expansion of the market, with Yanir Yakutiel, founder of fintech startup Sail Funding, noting that since 2015 the adoption of his product has been “phenomenal and exponential” and was “much faster than [Sail Funding] predicted in our forecast”.
Sail Funding secured $8 million in the company’s first capital raise late last year, and has an office in Sydney with a team of 10 developers based in Israel.
While Australia’s fintech sector has grown markedly in recent years, Yakutiel notes the it has a long way to go to catch up with other hubs like Israel.
“In Australia there’s almost social or economic engineering to set up an ecosystem from the top down,” Yakutiel says.
“In Israel they don’t use the term ecosystem – it’s already there. You can take a cab and they’ll tell you about their startup,” he says.
Similarly, Manfred Neustifter, founder of Brisbane-based payments platform Flowpay Australia, maintains that while Australian consumers are “very welcoming to new technology”, the fintech ecosystem still has room to develop.
“One of the best ways of [promoting] innovation is not just reaching out to startups but being ready to engage them,” he says, noting that after a recent trip to Lincoln, Nebraska – a much smaller market – investors and banks were much more ready to have meaningful business conversations with fintech startups.
“They punch above their weight in terms of the big fintech players there – meeting with them is night and day different to how it is here,” he says.
Yakutiel notes that Australian financial services and banks across the board are “relatively un-innovative”, which has made the sector ripe for disruption and “opened up a market in Australia for innovation”.
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“We are going to see consolidation [of the fintech sector] and a massive batch of new entrants to the market,” he says.
FinTech Victoria chief executive Alan Tsen noted the report’s results marked Australia as a key player on the global fintech scene, but acknowledged there was more to be done to encourage growth in this sector.
“One of the key things [to facilitate] fintech adoption in Australia is opening up its financial services systems,” Tsen says.
He suggests that “opening up the regulatory sandbox” and being able to access banking data via an API would further facilitate the development of the startup ecosystem.
“There’s an appetite for these kind of services in Australia. [The question is] how can we facilitate something that supports the startups building these products,” he says.
The Victorian Government announced plans earlier this month to establish a fintech hub in Melbourne to encourage collaboration between investors, startups and corporate bodies. The hopes are that this will boost Melbourne’s image as a globally competitive fintech city. Melbourne will also host Australia’s first fintech festival, Intersekt, in October in collaboration with Fintech Australia and Fintech Victoria.
While it seems fintech has become a key buzzword in government and corporate sectors, Neustifter believes what will truly drive innovation in the sector is a real commitment to working with startups and understanding the implications these financial technologies will have.
“There’s no need to talk about innovation when you’re doing it,” he says.