Anthony Thomson - Founder & Chairman, Atom Bank (Australia)

Having launched in 2015, branchless digital-only Atom Bank had the highest fund-raise of any UK fintech company ($102 million USD) in the first half of 2017 and has raised a total of almost £300 million pounds to date. Atom Bank founder and chairman Anthony Thomson has also personally invested in the Australian fintech ecosystem and has backed Melbourne-based peer-to-peer invoice financing company Timelio. We spoke to Anthony Thomson to learn more about the maturity of the Australian fintech industry and how challenger banks can look to capitalise on the Australian government’s evolving regulatory environment.

What are your thoughts on the development of several challenger banks in Australia and how will they take advantage of the Australian government’s reforms to reduce barriers to new banking entrants?

The Australian market, in terms of regulation, seems to be following the UK very closely. I think there are several things that have happened recently which are going to be fairly transformational in terms of banking.

The first is from a regulatory perspective, where we have seen Australia simplifying and shortening the process for applying for a new licence in banking. Prospective candidates can apply with less capital and - the key development here - is their ability to get it in a relatively short period of time, all of which has happened already in the UK and has led to a whole raft of new entrants in the market

I think the regulatory environment is very good in Australia and has never been more conducive to new entrants.

The second point is the arrival of open banking and payments services directive PSD2 [the revised payments and services directive] which provides opportunities for new entrants to come into the market and pull upon data from existing players to provide customers with a much better overview of financial services than they’ve ever had before.

These two developments are driving much more bank competition, as well as much more choice for consumers and that will be significantly favourable for new entrants.

There is also a big caveat alongside that, and that is the amount of capital available for new banks. Banks are very capital consumptive businesses.

What can these new entrants learn from your experience with Atom Bank?

In Atom, we’ve almost raised close to 300 million pounds to date, which is three or four times more than the other challenger banks put together. There is often a substantial difficulty for new entrants in raising that capital. The key challenge in the past has been the amount of capital required, and in essence that hasn’t changed – it’s about the minimum amount of capital needed against your risk-weighted assets

What the regulator is saying is ‘We’ll help you along the road of that process. You will still need to raise significant capital to be a bank, but there’s now a lot of opportunity for people to be neo-banks.’ It’s about taking bits of the banking process and optimising it. Though, if you’re going to be a bank, it’s still going to be a very expensive process.

Is the gradual demise of Australia’s big four banks upon us?

I don’t think so. They have significant scale, reach and customer bases. The big four have incumbent advantages but it’s important to note that there are several disadvantages to their incumbency as well – there are some diseconomies of scale that must be considered. For instance, the big four have got branches in places across the country that no-one wants to use and they’re not independent of regulatory challenges.

However, there is a significant opportunity for new banking entrants to come in and take market share away from the incumbents, particularly as the regulator wants to see more consumer choice and therefore more competition for the incumbents.

I think that, whilst there is an opportunity for new entrants to really take advantage of the changes, it will only be the few that are well capitalised that will succeed.

The big four banks are an oligopoly in Australia, but that means there’s a great opportunity for the new entrants coming in who can challenge that incumbency by giving customers a better deal.

What are your views on the maturity of the Australian fintech industry and how it compares to the US and UK – both in terms of its level of innovation and regulatory environment?

I think it’s a really exciting industry and it’s very similar to the UK in the way it’s regulated, (including) the social demographics, and the broader financial services industry. So it’s one I feel very comfortable in because it’s very similar to the one we’ve operated in for many years.

Back in July, Australian start-up Timelio announced it had funded $100 million in invoices through its peer-to-peer platform since launching two years ago, and the volume of its invoices in the second quarter of 2017 have increased by 50 per cent on the previous quarter.

Regarding my investment in Timelio, I’ve looked at a few tech businesses in Australia’s financial services landscape and I was really impressed by Charlotte and Andrew Petris, the founders of Timelio. They are two very smart individuals who have a very good idea and are executing it brilliantly, so when the opportunity to buy some shares in it came up, I was pleased to do so.

On the regulatory environment and level of innovation: there is often this misconception that Australia is lagging behind. I’m not sure that’s true, having visited local Australian fintech hubs like Stone and Chalk, there’s some very smart people doing very interesting things and I don’t necessarily get the sense that you are behind other markets like Singapore and the US because, at the end of the day, no one has a monopoly on good ideas.

For entrepreneurs and fintech founders, there is often this sense that everyone else in the world is doing better than they are. I spent some time in San Francisco and one of the companies I visited was Sequioa Capital, which has backed some of the smartest start-ups on the planet and I was amazed how much they knew about atom bank, based half a world away from them. There’s a lot of great things happening in the UK, New York, along the West Coast, in Singapore, but importantly in Australia as well.

How important are festivals like intersekt for the future of fintech in Australia?

This is not the first event that I’ve seen in Australia which has attracted people from all across the world to Australia for its local innovation and I’m sure it won’t be the last. It’s great to see a lot of interest already and to see that a lot of people will be in attendance, as I’m particularly interested in hearing what some of the local fintechs are up to and what they’re working on currently.

Anthony Thomson will be one of the keynote speakers at the Collab/Collide Summit, part of Australia’s inaugural Fintech Festival, ‘intersekt’, being held from October 27 to November 3.

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