The Australian | 23 May 2020
In recent years Australia has developed a strong fintech sector, which is now our best hope of increasing competition in the banking and finance sector. Companies such as Afterpay and Zip have become household names, but we need more to increase consumer choice and jobs.
The pandemic has been good for some new fintechs. Afterpay has grown. Active customers have hit 8.4 million — 122 per cent up on last year. Online sales are up by 8 per cent. Zip has also performed well, reporting quarterly increases in its customer and merchant numbers by 67 and 58 per cent respectively on last year’s numbers respectively.
Small businesses also love fintech for financing and managing things such as foreign exchange. The unicorns valued at more than $1bn include Airwallex, Afterpay, Canva and SafetyCulture and collectively account for more than 1800 jobs.
But as chairman of the Senate’s fintech inquiry, I fear growth in the sector could be lost. Or, worse, the big players could use the implicit four pillars policy to rerun the consolidation and loss of choice from the GFC. The last crisis killed too much competition.
The risk is that COVID-19 will choke off the money innovators need to challenge incumbents, although the initial signs are good. Fintechs have been able to recapitalise on their own steam as well as through schemes established by the federal government. The neobank Xinja raised $433m from the Middle East early last month. Fintech lenders Prospa and Judo Bank each received an allocation of more than $200m under the federal government’s loan guarantee scheme for small businesses. But the government cannot maintain the COVID-19 measures permanently and Australian fintechs will need to keep raising money offshore as there are few domestic pools of capital.
We should also take the opportunity to make digital improvement permanent. Electronic AGMs, Medicare Telehealth consultations and videoconferencing on legal documents should all be considered as permanent measures. Without picking winners, government can help businesses to succeed. Promoting foreign investment, which is mostly in Australia’s interests, and removing regulatory cobwebs are must-dos.
We cannot let the protectionists on the hard left or right win: Australia must maintain an open disposition to foreign capital. Fintechs and farms share the same fate. But the economy will look very different after COVID-19: the state hasn’t been this large since the Depression. My sense is the fundamentals will not change but the fintech sector will need the “best of breed” when it comes to regulation, tax and skills laws.
We have proven our ability to generate unicorns that can export Australian ingenuity but the race is on to hold our place. Singapore, London and California won’t wait for us.
Andrew Bragg is a Liberal senator and chair, Senate fintech inquiry