Australian fintechs set to take advantage of Asia’s new economic domination

Australia — and Australian fintech in particular — is in the box seat to capitalise on newly-released research which shows the world’s economic gravity shifting towards Asia.

The Global Financial index report, released in late March, and the KPMG Pulse FinTech report, released in February, have given new insights about the new world order when it comes to financial centres.

These reports show that the unthinkable is happening — Asian centres are seriously challenging iconic New York and London as the world’s most significant financial hubs.

These reports are backed by recent PWC research, which shows China and India are set to increase their share of world GDP at the expense of the US and Europe over the next three decades. Indonesia is also expected to improve its world ranking.

Australian fintech is in a sound strategic position to take advantage of this mega trend.

Australia has a strong reputation across Asia for its stable financial regulation and a business environment relatively free of corruption and government interference. We’re also in the right time zone to easily interact with the Asian financial markets.

We have the advantage of being home to one of the world’s largest pools of managed funds, thanks to our superannuation reforms, and a deep reservoir of financial services and allied professionals.

This makes us a highly sought-after business prospect, particularly in areas which require a high level of trust and are likely to transform financial services in coming years, including cyber security, international payments, digital financial advice and blockchain technology.

Sydney CBD at night

Moving up the ranks

Sydney and Melbourne have both increased their world financial centre ranking according to the Global Financial Centres Index released by UK-based commercial think tank Z/Yen

Sydney increased its ranking from 11 to eight, while Melbourne jumped from 24 to 21. It wasn’t that long ago, in the March 2015 index, that Sydney was languishing in 21st place with Melbourne at 28.

Top financial centres as listed in the Global Financial Centres Index from March 2017

This index is based on an objective analysis of the strengths of more than 100 financial centres, along with feedback from more than 3,000 industry professionals.

London and New York both kept their spots at the top of the table, but lost overall ranking points. Singapore, Hong Kong and Tokyo are now nipping at the heels of these famous financial centres after being among the 11 Asian centres that improved their place in the index.

On the contrary, the situation is grimmer in Europe, where seven cities lost their rank, including old-school favourites Zurich and Luxembourg, along with Frankfurt, Dublin and Amsterdam.

The United States had mixed results, with two cities (Chicago and Los Angeles) increasing their ranking and two falling (Boston and Washington DC). Meanwhile, three out of the four Canadian cities saw a ranking rise.

Overall, the report concludes that Brexit and the US presidential election were the main causes for the weaker outcome for London and New York.

Rising investment into Asia

Amazingly, the KPMG 2016 Pulse of FinTech report identified almost identical trends as the Global Financial Centres Index — despite the two reports focussing on slightly different subject matter.

KPMG Pulse of FinTech report

The KPMG report looked at investment into the world fintech sector.

It found that total fintech investment in the US dropped from $27 billion in 2015 to $12.8 billion in 2016. Again, Canada bucked this trend, after it enjoyed a record year for fintech venture capital investment.

Europe had an even worse result compared to the US, with total investment dropping from $10.9 billion to $2.2 billion.

Asia on the other hand saw total investment rise slightly from $8.4 billion in 2015 to $8.5 billion in 2016. As a sub-set of this, Australia’s fintech investment rose from $185 million in 2015 to $656 million in 2016.

Australia’s position in these changing times

Of course, time will tell whether these current trends last, particularly whether Europe can recover from jitters about Brexit and the US can return to projecting a strong global value proposition following the Trump election.

Australia will always have close economic and cultural ties with the United States and United Kingdom — particularly in financial services — and will be keen to keep, and expand on, those ties.

By the same token, Australia’s fintech industry will also be working to be a winner as the world’s financial centre axis moves towards Asia.

Mark Skelsey is the Director of PR and Comms at FinTech Australia, the industry association for Australia’s fintech industry. His email is mark@fintechaustralia.org.au while FinTech Australia’s website is www.fintechaustralia.org.au

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