Fintech review not a battle between start-ups and big business, says Andrew Bragg

Andrew Bragg says his review of the nascent fintech industry is not about big business versus start-ups.

Grace Wong, co-founder of LIVEN, says the regulatory response to blockchain has been ‘slow and vague’. Picture: Penny Stephens.

The federal government has kicked off a review of Australia's fintech industry in a bid to improve the nation's competitiveness, as entrepreneurs call for more support and a visa shake-up.

Liberal senator Andrew Bragg has secured parliamentary support to set up a Senate select committee inquiry into financial and regulatory technologies, and on Wednesday released an issues paper highlighting current hurdles facing the sector.

"Australian consumers and businesses will reap the benefits of technology but only if our policies are properly calibrated," the NSW senator said.

The financial sector represents 11 per cent of Australia's GDP.

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"This inquiry is not about big or small businesses or start-ups; it is about all Australian businesses being as innovative as possible to create the next wave of employment growth," Mr Bragg said. "Australia still has much work to do to transition and advance our economy."

The inquiry will look at the barriers to the uptake of new technologies, examine the industry overseas and consider ways it could reduce business compliance costs while ensuring Australia's laws and regulations are met.

One other key issue is whether superannuation funds will be required to sign up to a data-sharing regime.

Fintech in Australia covers a range of services including automated financial advice, insurance risk management, lending marketplaces, international and domestic payments and cyber security.

‘Lived experience’

Mr Bragg is calling on fintech companies to tell their 'lived experience' and make submissions to the inquiry. The deadline is December 31, 2019.

Yanir Yakutiel, the CEO and founder of business loan fintech start-up Lumi said Australia needed to emulate the success of innovation hubs like Israel and Silicon Valley — rather than be content being compared to the UK and Singapore — to ensure entrepreneurial success.

"The biggest changes to support this is need to be made to our current immigration and education systems," the executive said. "Australia needs the brightest and smartest to be able to call this country home and add to the startup economy, while our education system should also be more flexible in letting the people who come to study also stay and work for our startup businesses in particular.

Senator Andrew Bragg. Picture Kym Smith

"Our highly concentrated banking sector is another source of concern. It is extremely skewed towards property lending which makes it difficult for small businesses and startups to access capital. Our banking system has been burdened with extreme regulatory and compliance costs which has effectively made them nonactive with non-prime lending.

"The big advantages the banks have is a huge customer base and they are able to borrow easily. For a disrupter to come in and gain scale, businesses need to offer something that compensates their initial lack of advantage. The environment is competitive, but with an obvious skew towards the banks."

Attracting talent

Founder and managing partner of fintech-focused venture capital firm Seed Space Dirk Steller meanwhile said that Singapore, for example, is throwing hundreds of millions of dollars developing the fintech ecosystem through incentives such as tax relief, regulatory reform, and grants.

"The ability for Australia to attract offshore talent remains a key challenge for our government and that should certainly be a key priority for this select committee," he said. "Not only is Australia geographically isolated but it can be really hard to secure visas for skilled workers. The question at the heart of this issue comes back to government support.

"Connectivity with the UK is key, given similarities in regulation and legal frameworks, and importantly to take on some learnings from the UK which is several years ahead of Australia in the development of its fintech ecosystem.

"As highlighted by the issues paper, the UK-Australia Fintech bridge is a fantastic tool, but so far it has been more of a one way street and we need to do more to draw benefit for Australian fintechs from that relationship. Fintech bridges could be established with other nations, as the UK is currently doing."

‘Slow and vague’ on blockchain

Grace Wong, the co-founder of dining and restaurant payments fintech Liven, said the regulation of blockchain by the federal government had been slow and vague.

"We find it interesting that blockchain isn't even mentioned once in the federal budget. This is not surprising given DTA’s chief digital officer Peter Alexander told a Senate inquiry a year ago to wait for a 'standardised blockchain'," she said.

"In my opinion that misses the point, like waiting for a universal mobile operating system before ever buying a phone.

"The problem lies in the government thinking it is in a pretty similar state to most progressive governments looking at blockchain and trying to understand it but that's not the case. Governments and industries alike around the world are racing to reap the benefits of this technology, from delivering productivity to security and efficiency gains.

"The last budget has left industry with more questions than answers mostly about how serious they are in becoming a leader. Sitting on the sidelines waiting for other countries to make breakthroughs is not innovation."

Additional reporting: AAP.