Fintech competition is key to a better finance sector

As McKinsey says: “Most jobs created by technology are outside the technology-producing sector itself. We estimate that the introduction of the personal computer, for instance, has enabled the creation of 15.8 million net new jobs in the United States since 1980, even after accounting for jobs displaced.”

The technology bogeyman which caused consternation during the 2016 federal election in Queensland may have been slain by COVID-19.

One big dividend of the pandemic is that technology has shown its worth in everyday life. Electronic prescriptions, food delivery via phone applications and virtual AGMs have kept us going.

The technology bogeyman that caused consternation during the 2016 federal election in Queensland may have been slain by COVID-19.

A positive disposition to technology is one thing. The next thing is to have a plan for Australia to be competitive. The plan to be competitive in FinTech is the same plan for Australia to be competitive in technology and across the economy.

The fundamental need to be competitive is the same as it was before the pandemic. The need for reform is now more acute because we are in a recession and competing globally for new investment.

This means looking again at the big levers such as company and personal taxation as well as industrial relations.

The interim report is a deep dive into the issues in the FinTech and RegTech space. We identified five big challenges that determine Australia’s competitive position: taxation, access to capital, skills, culture and regulation.

First, on taxation, the Research and Development Tax Incentive has been a highly successful programme that has turned start-up businesses into large employers.

But there is great uncertainty in the market about how it applies to software and software needs to be unequivocally in the scheme.

Second, on capital, the National Science and Innovation Agenda reforms to establish new investment structures have worked well. The Early Stage Innovation Company scheme started from July 1, 2016 and for the first two years of the scheme, about $630 million was invested in ESICs.

Government should now like FinTech and be iterative by refining the structures on a regular basis.

We must also do all we can to attract foreign investment.

One way to do this is to ensure our inbound investment structures are world leading. The dated Johnson report should be implemented as we try to beat Singapore to win business from ailing Hong Kong.

A framework to regularly assess Australia’s global competitive position is also needed. We need to be reminded that Australia cannot afford a provincial focus.

Thirdly, on skills, there may be more we can do to encourage retooling of workers through the tax and skills systems.

Fourth, culture is perhaps the hardest part. If we want to be more like Israel, the government needs to lead by driving easy procurement policies and inviting RegTechs in to solve complex service delivery challenges.

Finally, regulation is, by definition, the largest body of work. It is the platform for success because it deals with standards and national competency.

A signature reform of the Coalition government has been the Consumer Data Right (CDR), which will allow consumers to move their banking and power business between providers. It puts the people’s data in their hands.

Our Inquiry recommends a new national body to deliver the Consumer Data Right. It is too important to be a unit in the Australian Competition and Consumer Commission (ACCC). It needs focus and accountability and the capacity to run a public information campaign.

Regulation must ensure competition is facilitated.

There is evidence of anti competitive behaviour and evidence that the regulators are not properly organised to drive competition.

Accordingly there should be a stronger competition mandate to promote innovation and guard against anti competitive behaviour in Australia.

The regulatory system should support innovation like buy now pay later products – not seek to push them into a one size fits all model that was designed for something entirely different (a credit card).

The Hayne royal commission showed there were significant problems in the financial sector. More choice and competition will most likely emerge from the FinTech sector which means it needs our support.

The good news is this is a sector that has blossomed – there are half a dozen “unicorns” that are valued in excess of $1 billion.

Afterpay, Zip, Airwallex and Canva are creating thousands of jobs and delivering better consumer choices.

Technology has delivered these jobs – and it will do more if we embrace it and the FinTech plan.