Innovation is a key driver of economic prosperity. More than 80% of Australian business leaders believe innovation is the main driver to creating a competitive economy and the best way to improve our country’s productivity.
The emergence of new technologies and the change of consumer behaviour have put pressure on traditional business models, demanding a rapid change from stakeholders to accommodate the new landscape. An example of this in the financial services space is “fintech” (financial technology), which merges ICT with financial services. International financial hubs are leveraging the proximity between these two industry sectors to promote partnerships, producing efficient and tailored services to their customers.
There has been a global movement towards fintech investment. Examples of this include:
- The UK government has been one of the world leaders in embracing fintech by producing different investment schemes, regulations reforms and overall collaborative support between innovative startups and the private sector;
- Banks such as Wells Fargo in New York have been also accelerating collaborative efforts to partner up with fintech startups and companies in Silicon Valley;
- Investment Banks and investment management corporations, such as BlackRock, have been benefiting from the new technology by securitizing P2P loans.
This movement has resulted in large amounts of capital being invested in this area by some of the largest financial markets in the world:
- Silicon Valley has an annual fintech investment of USD $1.5 billion;
- New York USD $600 million; and
- London USD $66 million.
It is imperative for Australia to expedite its efforts in supporting new financial technologies to ensure it continues to remain a leader in the international financial hubs. Sydney has been experiencing modest growth in the fintech industry and is the capital of Australia in tech start-up activity with 950 businesses. There are three funds that invest directly in Fintech (AWI, Reinventure and Oxygen Venture), with limited support from established firms (KPMG, 2014). The main elements to facilitate the creation of Sydney as the dominant fintech hub in the Asia Pacific region are available:
- Sydney is the capital of financial services in Australia, representing 42% of total national workforce in financial and insurance services.
- Sydney’s financial services industry contributes $57 billion to the State’s economy and has the highest concentration of financial professionals throughout Australia (KPMG, 2014).
- NSW has the highest concentration of Information and Communication Technology (ICT) workers with almost 32% of total workforce, and has the highest ICT annual university enrolments among the States (Australian Computer Science Society, 2013).
In May 2015, fintech start-up hub Stone and Chalk will be launched in Sydney. The hub came into being through a collaborative effort by the New South Wales government and other major players in the financial industry (22 in total) such as AMP, Westpac, ANZ, Intel and KPMG. Stone and Chalk is a not-for-profit fintech hub with the goal to establish a world leading fintech Industry (Stone & Chalk, n.d.).
When combining these factors and developments in the Sydney fintech environment, there is a strong indication of the momentum that is gathering and the opportunity that Sydney should capitalise on to become the dominant force in Asia-Pac for the growth and progression of financial services.