Why Australia is missing the fintech wave

A myopic government and an intransigent big banking sector are stunting the natural growth of Australian fintech with both consumers and providers of financial services bearing the burden, according to a leading voice in global alternative finance.

Speaking to AB+F on the sidelines of the AltFi Australasia Summit in Sydney on Monday (pictured), Rob Young, senior vice president: international at OnDeck Capital, said the UK’s stolen march on global fintech is being exacerbated Down Under by poor vision, limited cooperation and big bank excuses.

“I think arguably the government here could do better,” Young said. “Australia is really missing an opportunity, it really is. They’re not creating an industry that could go outside, elsewhere, export and become a world leader.

“That is what the UK is doing with its platforms, that’s what the US is doing - they are expanding globally, just as has happened in ecommerce. It is happening right now in fintech ... but you don’t see Australian businesses doing that. Because the government is only being reactive. Not proactive.”

Reluctant and reactive

Government policy is crucial in laying the initial architecture over which fintech lenders can thrive with action on compulsory loan referral schemes, and wholesale funding facilities for approved lenders, as standard best practice.

“In the UK, the law requires banks that reject a loan application to refer that business to a panel of alternative lenders. This idea could be translated successfully to the Australian market, especially given the lower levels of awareness here. In many cases, business owners simply don’t know there’s another funding option beyond their bank," said Young.

“Another way the UK Government has stepped up to support fintech is by providing lower-cost, wholesale funding to accredited alternative lenders. Of course, this benefits customers too, because the savings are passed on to them.”

Young added that Australian innovation across the alternative finance sector remains stifled by a reluctance to open credit, banking or data regimes.

More than words

He noted that while the UK’s open data regime compelled banks to share data and open up their APIs to third parties, the broader, holistic approach in the UK is to build the fintech industry as a source of jobs and as viable for the end customer. But it is fundamentally about nurturing “an industry of the future".

“The UK is a great example of where open data has been in place for several years, the alternative finance sector is flourishing, and even the banks have benefited by opening up cross-sell opportunities within their own businesses. It’s a win-win for the lending sector and its customers,” Young said.

“That’s my argument against Australia Inc: you’re saying the right words but actually it will probably amount to doing just an ok job. You’re not industry building. And you do have leading global banks, but who are going to be the leading Australian global fintechs?”

The Irish-born, senior VP said fintech here can flourish if stakeholders create the right environment.

“This means fast and easy sharing of data - with customers’ permission - so lenders can make informed decisions. Customers get a better deal when their lender has more certainty about their credit profile."

According to the “technology-enabled small business lender”, when banks hide behind issues of privacy, and government agencies stymie the sharing of data with fintech lenders the cost of borrowing is driven up and consumer awareness is driven down.

“It’s just an excuse. If you ask customers: would you provide data if, consequently, your cost of loan is lower, if it helps you get access to capital you otherwise wouldn’t? They would say yes!” Young suggested.

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