Category Archives: Innovation

A big year in #FinTech

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Looking back over the past year, it’s easy to see that 2015 has seen a giant leap forward for #FinTech in the Melbourne #startup scene. Much of this progress can be attributed to the efforts of the FinTech Melbourne Meetup Group, which, in little over a year, has established itself as one of the leading local startup groups, culminating in its first pitch night last month.
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There have been some significant business developments this year, including the launch and expansion of new P2P lending providers, payment platforms, digital currency solutions and robo-advice services. And while Melbourne does not yet have an equivalent to Sydney’s Stone & Chalk (a dedicated FinTech hub), there is enough momentum across the network of co-working spaces and the startup ecosystem of founders, advisors, incubators and accelerator programs to ensure that the city is building on its status as a financial centre.

For myself, the year in FinTech really got going with the inaugural FinTech Startup Weekend, which for me was a steep learning curve. I not only learned how to survive a hackathon, but I also gained a much deeper understanding of FinTech itself. I had become increasingly aware of the topic, via other meetup events, business networking and through reading (and writing for) specialist trade publications.* But until you actually see some of the innovative and practical ideas on new technical solutions for financial services, FinTech can seem like a lot of vaporware.

Emerging Winners

At the recent FinTech Melbourne Pitch Night, five local startups presented to a panel of distinguished judges in front of a packed audience at Melbourne Town Hall. Representing core fintech sectors (and the key messages from their pitches) were:

  • Fuzo – mobile payments platform: “2.5bn people don’t have a bank account”
  • CoinJar – a Bitcoin exchange: “targeting digital nomads”
  • StockLight – investment research: “24% of investors want help with analysis”
  • Moula – SME lending: “not a lender of last resort”
  • Timelio – cashflow finance: “factoring has missed the internet generation”

In what is traditionally a bank-dominated area of trade finance, Timelio is challenging the usual models for invoice discounting, while offering a new asset class for selected investors. I’ve featured Moula in this blog before, but this time around, I felt the presentation was quite low-key, and rather coy about the business model and the financials – maybe that’s because things are moving very quickly, and Moula is in the process of building significant traction via key commercial partnerships. The Fuzo pitch was quite complex (and probably too much technical information to present given the format), but the SIM card-based technology looks very interesting. StockLight‘s proposition is quite simple, and with access to quality content and a range of commercial models, could be one to watch as every financial institution is having to rethink wealth management and personal advice. However, on the night, CoinJar took out the first prize, and not for the first time, demonstrated how a simple concept can actually make the complex more straightforward: if nothing else, it proves that “Bitcoin can be done”.

Backlash

Some comments in the specialist trade publications have been quite scathing about FinTech, in particular those few startups that have embarked on public listings and IPOs. Much of this backlash relates to governance, disclosure and transparency; fair enough, they are important issues. But these criticisms should not be used to undermine the innovative technology, new business models and strategic partnerships that FinTech startups are bringing to the market.

Going mainstream

When otherwise conservative institutions such as industry superannuation funds start to embrace FinTech (e.g., Equip’s tie-up with Clover), or if the ASX decides to deploy blockchain technology to replace the CHESS clearing and settlement platform, it means that FinTech is definitely on the map, and can’t be written off or even ignored as some sort of irritating, disruptive upstart.

Next Steps?

In the wake of announcing the Victorian Government’s $60m LaunchVic startup initiative, the minister for small business, innovation and trade, Philip Dalidakis has been on a flurry of highly visible public speaking engagements, networking events and social media posts. Keen to get the message out there that his government intends to make Victoria a startup success, the minister is certainly generating considerable goodwill in the community.

I’m yet to understand fully the actual remit and stated goals of this new Quango. For example, what does “investing in core infrastructure” mean? Do we really need another bureaucratic body? Couldn’t the initiative have been better structured as a peak body to represent and support the private sector activities already underway?

If the minister is going to be true to his introductory remarks at the recent #hscodefest hackathon, the government needs to create the right environment for startups to flourish, not try to pick winners – leave that to the investors, entrepreneurs and industry experts. As an example, run a FinTech-themed hackathon to improve the Myki system…..

The Last Word…

Finally, for anyone needing an overview on crypto-currency and the future of money, I highly recommend Torsten Hoffmann‘s award-winning 2015 documentary, “Bitcoin: The End of Money as We Know It”, which received its Melbourne premiere last week at Collective Campus.

FOOTNOTE:

* I can’t claim any credit, but a few months after my Trade Finance blog, ICICI and Alibaba announced a new partnership – in part proving my theory that collaboration soon follows in the wake of disruption…

Next week: Crate-digging in Japan

#FinTech: The 8 things I want from mobile banking apps

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As we await the launch of ApplePay in Australia, and in light of the plethora of mobile banking tools, here is my wish list against which all such apps should be assessed:

  • TRUST – is my money safe?
  • CONVENIENCE – can I do multiple transactions from within the same app?
  • SECURITY – is my personal data secure?
  • RELIABILITY – will it always be there when I need to use it?
  • FLEXIBILITY – can I access and transact with all my accounts, brands and products from a single app?
  • COST – can I expect lower transaction, service and account fees if I use it?
  • SPEED – is it real-time?
  • EASE OF USE – is it intuitive?

Next week: Finding a career in #FinTech

Do we need a #FinTech safe harbour?

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As part of the recent FinTech Melbourne Meet Up, there was some discussion on the regulatory challenges startups face when trying to validate an early-stage concept. The notion of a safe harbour or “regulatory sandbox” has gained some momentum, with ASIC’s Innovation Hub, and a commentary by Deborah Ralston, of the Australian Centre for Financial Services, who is also inaugural Chair of ASIC’s Digital Finance Advisory Committee.

If we assume that the main purposes of financial regulation are: system stability, minimum professional standards, consumer confidence, investor protection, market transparency and risk mitigation, then I doubt anyone can deny the benefit of a formal and robust compliance regime. However, technology and innovation are combining to challenge and disrupt the inherent inefficiencies that can accrue within a static regulatory environment (especially one that is reactive, rather than pro-active), which is largely designed to monitor legacy frameworks and incumbant institutions.

While the ASIC initiative is not the same as obtaining an ATO private tax ruling, it does at least show that the regulator is keen to be more consultative in helping startups test new ideas. But the reality is the cost of initial compliance and licensing can be a barrier to a new venture, before the concept has even been market-tested. So perhaps there is an opportunity to ring-fence emergent FinTech ventures, so they can explore real-world applications, but limited by market scope, number of participants, transaction values and timeframes. (Such a model already exists for private equity offerings….)

As it stands, in the case of P2P lending platforms, a startup might find itself having to be licensed and regulated as a financial services provider, an approved consumer credit provider, an authorised depository institute and possibly a licensed financial planner as well. That’s a lot of compliance for a new business that might not even have a single customer.

From my own experience, what constitutes “financial advice” is subject to very wide interpretation. Several years ago, I was responsible for introducing a new financial product to the local market – a bond pricing information service. The service was aimed only at institutional investors (not retail customers), based on collated and published data supplied by existing market participants. Nor was it a real-time data feed; rather, it delivered intraday and end of day prices calculated on actual traded bonds. Yet the regulator determined this constituted “financial advice”, even though no trading recommendation or investment decision was inherent in the data. It was also designed to offer a more transparent and objective process for pricing portfolios of less liquid or rarely traded securities, where mark-to-market solutions are unavailable or inappropriate – thereby providing some clarity to market participants.

Meanwhile, the responses to shady advice and other malfeasance inflicted upon retail investors by “established” financial institutions and “traditional” financial planners usually take years to work their way through the legal and regulatory processes of investigation, mediation, settlement and prosecution. (And if anyone wants to understand what actually caused the GFC, well before the term FinTech had been coined, check out John Lanchester’s book “Whoops!”)

Next week: What I want from a mobile banking app.

Sharing the love – tips from #startup founders

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Startup Victoria, with support from inspire9, BlueChilli, PwC and the Australian Computer Society brought together a mix of expert speakers who shared their insights, experience and advice for aspiring startups. The evening took the form of a series of lightning talks, and again demonstrated the contribution and importance of the Lean Startup Melbourne Meetup events to the local startup community.

First up, Adam Stone from Speedlancer reflected on his experience of the 500 Startups accelerator program, via 6 simple lessons:

  1. Make sure you connect, network and avoid all marketing BS in your pitch
  2. Achieve the target of three growth hacks a week
  3. Work out your Unit Economics
  4. Remember to hustle – it’s important to secure market tests and investor meetings
  5. Play ping-pong (a lot)
  6. Target angel investors rather than VCs

Next, Kristeene Phelan, who was the first regional employee at Etsy, explored the theme of communication, when working with global and remote development teams:

  • Choose your collaboration tools carefully, and have a backup for your backup
  • Know your international time zones (and daylight saving changes…)
  • Compromise the scheduling of cross-border conference calls
  • Slow it down when talking live to multicultural and multilingual teams
  • Get the team together in person whenever possible, and also make time for 1:1 dialogue – face to face time is important

Then, Thomas Banks, Creative Director at the Centre for Access made a very personal and impassioned presentation on website accessibility: about 99% of websites are inaccessible to people with disabilities, underscoring the importance of having an inclusive approach to web and app design.

Geoff Dumsday talked about the significant work CSIRO is doing in accelerated innovation. Most of us probably know about CSIRO’s role in inventing WiFi and polymer banknotes. But perhaps less well-known is the fact that CSIRO work with around 1600 clients, including 350 multi-national companies, and have over 300 commercial licenses in use for technology and inventions coming out of the work their scientists and researchers do. As Australia’s innovation catalyst, CSIRO is enhancing the entrepreneurial culture through evidence-based R&D. Such as the invention of non-animal gelatine for use in biomedicine, food and cosmetics.

LIFX co-founder Daniel May pitched the need to make products that add value or make a difference to the world. As examples, he referred to his new project, AgreeTree, which is trying to take the pain out of drafting commercial contracts; and also to the work of the Asylum Seeker Resource Centre and how it is engaging entrepreneurs via an accelerator program.

Finally, Layla Foord from Envato covered the topic of building successful teams, especially when hiring early-stage employees. Using the theme of “pitch in, not mark territory”, she emphasised leveraging attitude and mindset over job titles.

This smorgasbord of ideas and content was a useful reminder to aspiring founders and entrepreneurs that while a great idea (backed by a solid business plan, market traction and protectable IP) will help get you motivated, the human touch is vital to gaining momentum for your project.

Next week: #FinTech – A Tale of Two Cities: Melbourne vs Sydney