The Antipodean Sandbox: International Trade and FinTech in Australia

Author: Joe Roche · September 15, 2022

I was recently lucky enough to be invited by Department for International Trade (DIT) to attend and participate on their FinTech Trade Mission to Australia.

On both a personal and professional level, this was super exciting for me, as on behalf of FinTech North I helped to deliver some virtual trade mission activity in collaboration with DIT during the covid lockdown in 2021. It just goes to show, what starts as a virtual meeting on a screen in your living room can really turn into business outcomes on the other side of the world!

The trade mission took place in the two territories, or states, of New South Wales (NSW) and Victoria (VIC). Both are home to the iconic cities of Sydney and Melbourne respectively. Both cities have loads of great things going for them, and several nuanced differences and specialisms too. In what was my first time in Aus, I was struck by the iconic sights and clement winter weather of Sydney, which I also found to be an easy city to navigate and travel across, which is good news for anyone who likes beaches. With Melbourne, the brisk weather in the winter is more akin to North so I felt right at home! A tidy, cosmopolitan, multicultural metropolis, Melbourne has culture everywhere you look, with great nightlife and a thriving pub/bar scene.

When I set off on my Odyssey from Manchester airport, I thought it might be useful to Northern businesses to produce a guide, something concise to condense down some of what I learned and experienced, to make it easier for Northern entrepreneurs and FinTech leaders to consider and embark upon their own export journey. One (of many) things I’ve learned in my time supporting and engaging with Northern FinTechs, is that during their growth they are (quite rightly) hyper-busy.

Time, resource, energy and ultimately bandwidth are all at a premium. There’s always the next fundraise, the next key hire, the next head-wind to navigate – in short, there’s plenty to occupy the average FinTech founder right here on our shores, let alone looking for opportunity beyond them.

So why do it? Why bother?

If you’re a FinTech leader, you may be thinking; why Australia? The UK is already a massive market for FinTech solutions and we have some of the best regulatory regimes in the world for fostering innovation. Neither of those conclusions would be wrong, however, if growth is part of your business model/plan, then you should certainly be looking beyond the UK.

More-over, I think Australia has some significant USP’s to consider carefully:

1. Australia is a great FinTech testbed, think of it as an Antipodean sandbox, a place to test a new product or service on a new, but similar tech-savvy market
2. Gateway to the huge Asia Pacific Market

Some facts about Australian FinTech:

• There are c.800 FinTechs in Australia
• 50% in Sydney, NSW – office space overheads are on average higher
• 30% in Melbourne, VIC – office space overheads are on average lower
• There has been a recent explosion of co-working spaces in both Sydney and Melbourne – both cities are undergoing hybrid working patterns much like here in the UK (e.g. c. 3 days in the office per week)
• There is a sophisticated and well established banking ecosystem, dominated by 4 national banks (2 based in Sydney, 2 in Melbourne), featuring smaller regional banks
• The Australian market is hot on (interest and strengths in): Payments, Lending, WealthTech, Business tools, Big data
• Opportunities for Northern FinTechs: Open Banking*, RegTech, Asset management, marketplaces, challengers/neobanks, mortgages
• *A word on the CDR (or the Consumer Data Right, which I now struggle to pronounce without an aussie accent) is regulation akin to Open Banking (or PSD2) in the UK – It is not as advanced, nor is adoption/useage as high, but it is snowballing much like OB did in the UK and is expanding more quickly beyond FinTech into areas such as energy and telecoms – it is quite possible that Australia will embrace Open Finance sooner than the UK.
• The regulators are very collaborative both domestically and internationally – what’s more, in their words, they regulate the risk and the function, not the technology.
• One of the regulators – ASIC – has an ‘Innovation Hub’ called the ERS, which operates like a regulatory sandbox

A word on the regulatory landscape – Australia has a quite complex but very collaborative and progressive group of regulators. Probably the main ones to be aware of are ACCC and ASIC. I’ll list them all below* to give an idea of where they overlap, which is good to be aware of depending on your business/product… get ready for some acronyms:

1. ACCC –Data recipient accreditation
2. ASIC – Australian FS, Credit and Market licences
3. OAIC – Privacy and freedom of information
4. RBA – Designation of Payment Systems
5. APRA – Authorisation as; ADI, Payment Facility Provider, Insurer and life insurer, Superannuation entity
6. AUSTRAC – Enrolment, or enrolment and registration of Reporting Entities

*1) Australian Competition and Consumer Commission 2) Australian Securities and Investments Commission 3) Office of the Australian Information Commissioner 4) Reserve Bank of Australia 5) Australian Prudential Regulatory Authority 6) Australian Transaction Reports and Analysis Centre

So for example, if you’re a b2c payments FinTech, you might need to deal with 4 or 5 regulators. If you’re a data company, you might only need to deal with 1 or 2. This might sound complex and even overwhelming, but the regulatory ecosystem works communicatively and collaboratively, and it isn’t necessary to engage a law firm to assist with this – however doing so would almost certainly be a good idea – again FTN can help with introductions here.

The UK-AUS FTA – 2023

The UK has signed a free trade agreement with Australia coming into force in early 2023. A lot of the main points here are around people – hiring and visas etc. Here are some brief highlights:

• Temporary entry for business persons – a move towards a progressive business visa;
  • established visitor visas, project workers can stay in Aus 6-12months
  • intra-corporate executives and contracted service suppliers – 4 years + spouse and kids
• “FS Chapter” with UK – UK businesses will be treated with regulatory equity, and there will be a joint regulatory forum with the FCA
• Backpacker visa being extended to 18-35 year olds – allows people to stay for a working holiday for 3 years

Candid observations about the ecosystem:

• I think it is ripe for disruption – the banks in Aus are better at innovating than the UK incumbents, however there are still opportunities and someone doing something truly different, marketing and connecting with the market in an innovative and resonant way, could make it
• There are huge opportunities for innovative payments firms, especially those who want to work with big banks
• There are other opportunities with smaller more regional banks, who are more likely to take risks
• It is a great place to test a product or new business – think of it as an antipodean sandbox
• There is low-hanging fruit on the fringes of the banking ecosystem
• Access to local talent, graduates and also via huge developer pools working for the banks = lots of talent but also an employee’s market
• There is a dearth (a lack of) certain solutions such as; Mortgages, p2p marketplaces, asset management/wealthtech, truly innovative neobanks & challengers
• In the middle of a talent and retention crisis – What better way to retain valued employees than offering them the chance to live and work in your Australian HQ for a year or however long?!
• Culturally, Australia is quite inward looking especially compared to the UK, probably due to its geography – to network effectively, you need to hit the streets (and the bars and restaurants for the networking do’s) and do business in a relationship focussed way – Aussies like to get to know you first
• Setting up in Melbourne vs Sydney = wherever your first big partner/customer is based!
  • That said, here are some differentiators that jumped out at me:

• Leave a few days either side of any business trip / initial trade mission – a bit of down-time in each city may cost more but will give you a great idea if you / your team will like living and working there.
• Tim Tams > way way better than Penguins
• I only saw one massive spider

“Australia is a great test-bed”

Key organisations to support any expansion: 

We met several fantastic organisations during the trip – most of this content is learned and repurposed from talking to them.

• Austrade
• Think & Grow
• Invest Victoria
• Invest NSW
• DIT (Department for International Trade)
• FinTech Australia

Above: Providing an overview of FinTech activity in North on a podcast with Dexter Cousins, the voice of Australian FinTech and Managing Director of Tier One People.

We (FinTech North) have great relationships with all of the above so we would be delighted to connect you. Exploratory chats with the above organisations could not be recommended enough.

Time Zones: Aussies are very willing and are often used to speaking in their early evening, which is roughly the start of our day depending on DST. That said, if you’re flexible enough for an early call (UK time) I’m sure that would always be appreciated!

VC trends and funding:

• Major banks have set up funding and VC arms
  • Focus generally on products that help banks and customers
• Big funding opportunities in payments
• Importance of brand is massive in customer consideration – scale to appeal to large middle markets

FinTech in New Zealand

I’d also like to highlight some of what I learned about FinTech in New Zealand – future Trade Missions aim to incorporate a trip to NZ, but as a preview here’s somethings to be aware of:

• Opportunities in; Embedded Finance / BNPL, DLT
• Most NZ FinTechs are already exporters – mainly to US, AUS, UK + EU
• Asia is the closest market, huge market for FinTech – penetration has been an issue
• Talent issues due to harsh covid policies
• Access to capital is still really strong in NZ
• Regs similar to Aus, follows a ‘twin-peak’ model of national/central bank forming reg authority
• Relaxed regulatory market when it comes to licenses
• Setting up in NZ website
• Payments NZ group
• CDR coming through in NZ

As with any business decision – do your due diligence! However, I would recommend exploratory conversations with some of the aforementioned organisations first, as they all have resources to assist.

This is bringing me up towards 2k words so I’d like to draw it to a close with a hope and a prayer that this proves useful to some FinTechs somewhere in the North.

I’d like to say a massive thank you to FinTech North for giving me the opportunity to join the DIT trade mission and to the teams at DIT (Northern Powerhouse and Australia) for doing an amazing job of organising a great itinerary.

Finally thanks to the fellow companies on the mission for being great company and thanks to every aussie we met for being so friendly to a bunch of poms!

If you have any questions, thoughts or would like to collaborate in any way please reach out – strategically we’re here to support and develop Northern FinTech both inwardly and with outbound opportunities.

joe@fintechnorth.uk