Why fintech is growing in Australia — and is an ideal market for testing new ideas
Sydney, Australia’s most well-known city, is not only a hot tourist destination for backpackers and Europeans — it has also earned itself the title of “Australia’s Fintech Hub”. In recent years, Sydney has taken the lead in both Australia’s fintech and startup scenes, with many fresh-faced companies making significant waves in recent years at home and abroad. So what is happening down under, that’s resulting in such growth in the fintech space? And why is it centred mostly in Sydney?
Overall, there are said to be 629 fintechs active in Australia. Investment in the Australian fintech sector has followed a trend globally, with $101M investment activity recorded in the first half of 2019, according to the most recent KPMG Pulse of Fintech report. Yet with the largest city population of the nation, Sydney is one of the top cities for economic opportunity, despite being a rather expensive destination — and has continued to prosper, due to its growth-prone business environment (see also why Sydney is great for startups here).
As Australia’s financial capital, with a $60 billion financial services industry, the city has also been leading the way for startups — hosting the first dedicated space for fintech entrepreneurs, Tyro Fintech Hub. According to Australian FinTech, Sydney is home to over half of Australia’s fintech companies, though its not alone — with competition now rising in the thriving fintech scene in Melbourne in recent years, bringing more attention to this growing industry on the world stage.
We recently sat down with Lukas Bower, Managing Director of Industrie&Co — a high-growth fintech consultancy based in Sydney, with offices across the Asia Pacific — to learn more about this rising growth of the fintech scene in Sydney, more broadly in Australia, and even across the shore to New Zealand. Here’s what he had to say…
Startup Colors: Great to speak with you Lukas! I am super curious fintech in Australia, your part of the world. But firstly, please tell us a little bit about what you do, and how you’re involved in the local fintech scene?
Lukas: Sure, and happy to be here. At Industrie&Co, we focus on Australian and Asian financial services. As you know, the Australian startup ecosystem has grown tremendously in recent years. Over $1.5bn of investment was raised by VC funds in 2017 and 2018 and we now have over 25 accelerators and incubators. Therefore, competences are becoming more and more important to diversify from the competition.
Industrie&Co has the capabilities of a systems integrator, strategy firm and digital agency under one roof in a 200-person firm. We currently have four offices — Sydney, Melbourne, Hong Kong and Singapore. Recently, we helped to develop HSBC’s PayMe — a chat-based payments platform competing with WePay and Alipay. And we’re also currently working on blockchain-related projects, including the graphical interface for the new DLT-based ASX CHESS system.
Startup Colors: It seems to me that fintech is really growing in Australia, could you tell us why?
Lukas: It truly is, especially recently. Traditionally, there was a regulatory structure in Australia that presented some barriers for Fintechs. In the beginning of 2019, things changed with a royal commission, that had a profound impact on the ability of financial startups to execute and operate, opening many opportunities.
Startup Colors: Being active in Australia, Asia and New Zealand, which is a rather small market, how do you scale your solutions?
Lukas: Great question. The local market may be small in terms of population, but it has a lot of revenue potential. Experts think that fintech revenue opportunity here is roughly 50 billion per year today. You also have one of the most digitally connected populations in the world that skews quite young, making it a great testbed for any fintech idea. We continue to leverage our APAC FinTech experience.
Startup Colors: I heard you are originally from the United States and used to work in fintech there. What differences do you see?
Lukas: The United States is a great market, but it’s also very competitive. I think there’s a lot more opportunity for new startups in Australia. The country has all the ingredients for success — a great university system with quality graduates, a suitable lifestyle for attracting new talent and an open infrastructure with the recent regulatory change. If you look at our university system, over $85 million has been poured into new affiliated startup programs only in the last 5 years, showing great growth in the ecosystem.
Startup Colors: What about future collaboration with banks? Is that feasible?
Lukas: Absolutely. We have a great relationship with the big banks and top insurers as a technology service provider and systems integrator.
Startup Colors: I get the impression that people are very open to new ideas here. Is that true?
Lukas: Australian Financial Services might have been less open in the past, but new regulation and FinTech competition is opening up the market. This trend is helping Australian customers build a goal-oriented single view of their financial life, across all aspects of their finances, contributing to a next-generation customer experience.
Startup Colors: I heard that neobanks like N26 and Revolut are also looking to enter this market. Is it easy for an international company to do so?
Lukas: It always depends on what you’re doing. For example, acquiring a banking license in Australia is quite an involved process that might take several years. However, if you find a partner in the Australian market, entering is much easier. Up Bank is a great example of this — they partnered with Bendigo Bank, an existing Australian institution, and beat many of their competitors to market.
Startup Colors: You mentioned above PayMe as one of your recent achievements. Tell me more about it, how you tackled the big competition, and what your next steps are.
Lukas: We did PayMe with HSBC. At first, we created together a B2C proposition and then, we extended it to a B2B one. Both have been a massive success in the market, helping HSBC defend their turf. We are now focused on working with a Japanese private equity firm, J Trust, to build a digital bank in the cloud to support some of their acquisitions in Cambodia — and create a fully digital bank that services Cambodian customers.
Startup Colors: Super fascinating! How do you reach all of these people across the continents?
Lukas: We’ve been very fortunate. We focus on doing great work, building high performance solutions and delighting our customers. We listen to the market and go out and talk to people. You have to truly adapt quickly to be successful.
Startup Colors: For an international entrepreneur that comes to Australia, which is the best city to start in?
Lukas: It depends on what you do, but it’s a choice between Sydney, Melbourne and Brisbane. If you’re in the angel round of investment, go and test out Brisbane as a smaller market. If you want to scale, go to Sydney or Melbourne. Industry is also important. A good example of this importance is in fintech — 60% of Australia’s fintech companies are in Sydney.
Startup Colors: Everything sounds perfect, but I’m sure there are some challenges…
Lukas: Of course. We are a growing market, so it’s a constant war for talent. We also have a lot of spiders and snakes, so be careful where you put your shoes on in the morning!
Startup Colors: Last question: In your opinion, when is the best time to come to Australia? And are there any fintech-related events worth making the long trip down under for?
Lukas: If you’re coming for a holiday then around Christmas time is great. If you’re doing some business instead, that’s the worst time to come, because the country essentially shuts down. In terms of an event, the Finnies Awards are great! Our startup Athena won first prize — so we’re very proud.
Startup Colors: Congratulations! Thank you once again for coming and talking to us. It’s been a pleasure!