Digital Richmond

How significant is one suburb’s contribution to the startup ecosystem in Melbourne, if not Victoria or even Australia? Well, if the recent panel on Digital Richmond (plus the Victorian Minister for Small Business, Innovation & Trade) are to be believed, VIC 3121 is the epicentre of all things startup.

According to the event description, Richmond (and the adjoining area of Cremorne) is “the stomping ground of choice for Melbourne’s established tech companies and aspiring start-ups alike”.

Hosted in the offices of 99Designs (celebrating bringing their HQ back to Richmond), a panel representing some of the biggest names among Australia’s tech companies (and all local heroes) explored what makes “Digital Richmond” tick – but also identified some of the challenges of growing and sustaining scale-up ventures beyond the confines of a few co-working spaces in converted warehouses and textile factories….

Facilitated by Rachel Neumann former MD of Eventbrite Australia (whose Australian HQ is in Melbourne), and briefly head of 500 Melbourne, the panel comprised some key Richmond/Cremorne tenants: Patrick Llewellyn, CEO at 99designs; Jodie Auster, General Manager for UberEATS in Melbourne; Cameron McIntyre, CEO of Carsales; Nigel Dalton, Chief Inventor at REA Group; and Eloise Watson, Investment Manager at VC fund Rampersand.

To set the scene, mention was made of other established Australian tech-based companies also HQ’d in Melbourne (MYOB and SEEK, the latter of which is also relocating its offices to Richmond), recent local successes such as Rome2Rio and CultureAmp (both born in Richmond), and the steady stream of global tech brands that have come to call 3121 their regional/national home, such as Stripe, Slack, Square and Etsy.

It was evident that each of the panel have previous business connections with one or more of their fellow panelists – so maybe there is simply value in being in close proximity to each other. Success begets success, especially when people are more willing to share connections and introduce new contacts into their networks. (Although, what might this say about diversity? And does it reinforce the notion that “it’s not what you know, it’s who you know”?)

Despite the number of co-working spaces and tech companies based locally, there are very few substantial, modern office buildings in the area, and only one business park of note. Local startups that need more space will likely have to relocate elsewhere.

Property aside, the panel considered other local infrastructure is generally conducive to success – access to public transport (although Richmond and East Richmond stations are both in serious need of an upgrade), a solid talent base, great coffee shops and proximity to the CBD.

On the downside, there was criticism at the lack of NBN access in such a concentrated pocket of tech companies and startups (with the associated numbers of contractors, freelancers and other members of the gig economy who live in the area and work from home). Car parking was also an issue, although with Richmond being a major public transport hub, I was surprised that this came up. A lack of child care facilities was also mentioned.

Being an inner city suburb, with strict planning laws and designated “heritage overlay” regulations, there are limits to the amount of development that can take place, especially as Richmond and Cremorne are also established residential areas, with medium to high population density. Getting the balance right between economic growth, urban renewal, modernisation and local community preservation is tricky – pity that the organisers had not thought to invite anyone from the local council.

The panel also bemoaned the absence of any tertiary education facilities in the area (by implication, does that mean the Kangan Institute campus in Cremorne doesn’t meet local requirements?). But maybe there are other ways to connect with academia?

The panel discussion then moved on to topics that are beyond the control of the local council or even the State government, yet each has an impact on the startup economy: corporate tax rates; employment visas; the schooling system; vocational education and training; and the need for inter-disciplinary and inter-generational hiring. (They may as well have added industrial relations laws, the productivity debate and smart cities – oh, and the National Innovation and Science Agenda.)

I was also surprised at one of the reasons given for 99Designs bringing their global HQ back to Australia – the appeal of an ASX listing. I know that Australia has one of the largest pools of pension funds in the world, and nearly every person in Australia has direct or indirect investments in Australian equities within their superannuation portfolio. But despite being ranked 15th by market capitalisation, the ASX represents less than 2% of the global market, and even after 25 years without a recession, Australia’s capital markets risk being left behind. If we are to grow the local tech sector, there needs to be much more alignment between where (and what type of) capital is needed, and where the pension funds and other institutional investors like to put their money.

Finally, I always get worried when the likes of Carsales, REA Group, MYOB and SEEK are held up as poster children for the local tech and startup sectors – great businesses, sure, but all about to be totally disrupted by the next wave of startups, and not quite the high-tech sectors that the Victorian government wants to champion (FinTech, MedTech, BioTech, NanoTech, AgriTech, Cyber Security, Smart Manufacturing, EduTech….).

Next week: The NAB SME Hackathon

 

Token ring – a digital ID solution

The latest event organized by DIG ID (the Melbourne Digital Identity Meetup) featured a Q&A with Steve Shapiro, CTO of Token, moderated by Alan Tsen, General Manager of Stone & Chalk Melbourne. Given the current level of interest in solutions to address online fraud, ID theft, data protection, privacy and personal security, the discussion covered a lot of conceptual and technical topics in a short space of time, so here are some of the key points.

First off, Steve spoke about his start-up and tech journey, that took him from IM (Digsby, Tagged, Bloomberg IB), to cryptocurrency and digital wallets (Case), to digital ID with the Token ring. The pivot towards an ID solution came about after working on Case, where he realized that most consumers don’t understand private key management and the issue of permanence (as compared to the internet, where password re-sets are relatively easy, and often regularly enforced upon users).

If the goal is to provide fool-proof but highly secure end-user authentication, the solution has to focus on the “signing device”, by making it much easier than the status quo. Hence the combination of two-factor authentication (2FA) and bio-metrics to enable Token ring users to live key-less, card-less and cashless, and without having to constantly remember and update passwords. In short, the Token ring works with anything contactless, as long as the relevant permission/authentication protocol layer (challenge and response process) is compatible with the ring’s circuitry.

In assessing the downside risk, gaining consumer adoption is critical, to ensure that users see the benefits of the convenience combined with the credentialing power. Equally, success will depend on the ability to scale as a hardware manufacturer, and the potential to drive traction through virality.

There is still a lot of design work to do on the hardware itself (to enable assembly, customization and distribution as locally as possible). And the platform needs to bring on more partner protocols, especially in key verticals. At the end of the day, this is still a Blockchain solution, with a UX layer for the cryptographic component.

When asked about the future of ID, Steve felt that in the medium term, consumers will no longer have to carry around multiple cards or have to remember multiple passwords. Longer term, governments will no longer be the central authority on managing ID: unlike today, a driver’s license will no longer be the gold standard – instead, solutions will be based on decentralized, contextualized and user-defined ID.

This led to a discussion about Sovereign IDe-government and digital citizenship (e.g., Dubai and Estonia) – and the break up of big government in favour of more city-states. (Which could result either in a “small is beautiful” approach to self-governing and sustainable communities, or a dystopian nightmare of human geo-blocking, as in a film like “Code 46”).

For the tech buffs, the Token ring’s IC hosts a total of 84 components, including the main secure element (as with mobile phones and other devices), finger print reader, optical scan, Bluetooth, NFC, accelerometer, MCU, Custom inductive charging etc.

Finally, there was a discussion about the risk of cloning, mimicking or breaching the unique and secure ID attributes embedded in each Token ring. While it is possible for users to encrypt other knowledge components as part of their individual access verification and authentication (e.g., hand gestures), there is still a need to rely upon trusted manufacturers not to corrupt or compromise the secure layer. And while the public keys to core protocols (such as credit cards and swipe cards) are maintained by the protocol owners themselves and not stored on the device or on Token’s servers, it will be possible for other third parties to on-board their own protocols via a SDK.

Next week: Startup Vic’s EdTech Pitch Night

 

 

Tech, Travel and Tourism (revisited)

Just over two years ago, I posted a blog on how the tourism and travel industries needed to embrace the opportunities brought about by digital disruption. Having been on half a dozen overseas trips in the past 12 months, I can see that there have been some improvements in the traveler experience, but there is still a lot of room for improvement…

One of the biggest benefits has been the expanded integration of public transportation information into Google Maps. Navigation and route planning, right down to which platform to board from or which subway exit to take, has been a huge boost to the traveler UX. Many cities are now using integrated stored value cards for public transport, but limitations still exist: for example, some systems don’t make it that easy for overseas visitors to obtain the card itself, others make it hard to re-load other than by cash; while only a few systems, like Hong Kong and Japan, support multiple point-of-sale transactions for shops, restaurants and other services.

Another plus for frequent travelers has been the increased adoption of chip-enabled, e-passports which streamline the immigration entry/exit process (but only for participating countries, of course). Laborious paperwork still exists in many cases with arrival/departure cards and customs declaration forms – but over time, these processes should become more streamlined with the adoption of digital IDs and biometrics.

Using local mobile phone networks may have gotten easier with compatible operating systems, but even with pre-paid travel SIM cards and data packages, access costs are still disproportionately expensive for overseas visitors. Sure, there are more and more public WiFi services and hotspots available, but most still require users to provide personal data and/or reveal security weaknesses. Even though I recently purchased a mobile pass to access “free” WiFi services abroad, it’s hard to see what value it offers, because it only works after I have already logged onto the WiFi network.

Getting flight information, notifications and alerts via SMS and e-mail has improved considerably, along with easier online booking tools and mobile check-in solutions – and of course, QR codes now support paperless boarding cards. But I’ve noticed that some airline apps don’t support full integration with mobile phone wallets, and consolidating ticketing and invoicing information (e.g., for consolidated expense reporting) from multiple airlines and booking platforms still feels a long way off.

Finally, a constant irritation for travelers are the card transaction fees that most hotels still pass on at checkout – as if many guests are likely to pay in cash! – compounded by the FX fees that the credit card companies also like to charge. All up, this can mean an average of between 3% and 5% in additional fees, in a situation where hotel guests are something of a captive audience. Transaction fees remain a target for further disruption….

Next week: Token ring – a digital ID solution

 

 

 

FinTech and the Regulators

What’s the collective noun for a group of financial services regulators? Given the current focus on FinTech sand box regulation and the cultivation of innovation, but also the somewhat ambiguous (and sometimes overlapping) roles between policy implementation, industry enforcement and startup monitoring, may I suggest it should be an “arbitrarium”?

Whatever, a panel of regulators (ASIC, RBA, APRA and AUSTRAC) came together at the recent FinTech Melbourne meetup to showcase what they have been working on.

First up, ASIC talked about their Innovation Hub and Sandbox, designed to accelerate the licensing process. Most of the FinTech startups engaging with the Innovation Hub are operating in marketplace lending, digital/robo advice, payment solutions and consumer credit services. Meanwhile, ASIC is seeing a growing number of enquiries from RegTech startups, and as a result, the regulator will be running a showcase event in Melbourne in the near future.

Next, the RBA gave an update on the new payments system (NPP), which will operate under the auspices of the Payments System Platform Mandate. A key aspect of this “pay anyone, anywhere, anytime” model is ISO 20022, the data standard that covers “simple addressing” as part of the payment interchange, clearing and settlement protocols. The system is due to go live later in 2017.

The biggest news came from APRA, in their role of licensing Authorised Depository Institutions (ADIs). According to APRA statistics, 26 new ADIs have been approved in the last 10 years. Most licenses come with significant conditions attached, so APRA is looking to simplify the process and encourage more competition. Similar to ASIC’s sandbox model, new entrants will be able to apply for “restricted ADI” status, under a 2-year license, with certain limitations on the size and volume of their book of business. Essentially, there will be a less onerous startup capital requirement, and the new regime is expected to be operational in the second half of 2018.

Finally, AUSTRAC gave an update on their responsibilities under the AML/CTF Act 2006. While AUSTRAC has selective oversight of FinTech startups, it has responsibility for 14,000 reporting entities, including businesses holding gambling permits. Acknowledging there is something of regulatory lag when compared to new business models and new technology, AUSTRAC pointed to the Fintel Alliance, launched earlier this year, and which may run its own pilot sandbox. Currently undertaking a legislative review and reform exercise, a key aspect of AUSTRAC’s work is undertaking product and sector risk assessment.

During the audience Q&A (including some interesting contributions from ASIC Chairman, Greg Medcraft) there was discussion of cryptocurrencies and blockchain solutions vis-a-vis the NPP, and how to address the potential conflict of laws, for example between KYC and privacy and data protection.

Next week: YBF FinTech pitch night