YBF #FinTech pitch night

It’s getting difficult to keep up with all the FinTech activity in Melbourne – from Meetups to pitch nights, from hubs to incubators. The latest Next Money / York Butter Factory / Fintech Victoria pitch night was a showcase for three startups-in-residence at YBF. As such, it was not the usual pitch competition – more an opportunity for the startups to hone their presentations.

First up was Handy, an app-based solution that connects trades with customers to streamline the settlement process for property insurance claims. There is an industry-wide low-level of satisfaction with property claims – which can take up to 60 days to process, even though 80% of claims are for less than $5,000. Handy offers a faster solution, and doesn’t require a lengthy estimate or quoting process, using instead fixed-price rates. With a target market of 100,000 claims per annum, Handy expects to generate 25% savings to the insurance industry, as well as having a broader societal impact in terms of speedier claims, better appreciation of service providers, and more consideration of the respective needs of householders and trades. Launching an MVP in November, there are four insurance firms in pilot test mode. Aiming for a white label solution, Handy will charge clients basic setup and maintenance fees, as well as volume transaction costs (although the exact pricing and revenue model still needs to be worked out). There were audience questions about the liability for quality of work and dispute resolution, the trade supplier on boarding and verification process, and the process for communicating to policy holders whether their insurance provider or broker is covered by the platform.

Next was FinPass, a startup appealing to the 40% of the workforce expected to be freelance by 2020 – a key feature of the gig economy. Targeting so-called “slashies“, FinPass is designed to help customers apply for personal loans when they don’t have a single, steady or stable source of income – and therefore, may lack a formal credit rating or personal credit score – while adhering to the five Cs of credit. Using a combination of blockchain and API to validate a loan applicant’s income profile, FinPass would then make this data available to approved lenders (subject, presumably, to consumer credit and lending standards, customer privacy and data protection requirements). To be fair, this project was fresh from winning a recent hackathon event, and therefore is still at the concept stage. However, it was clear that much needs to be done to define the revenue model, as well as designing the actual blockchain solution. Audience feedback questioned the need for a standalone solution, given the existence of various block explorers, APIs, vendors, protocols and bank feed sources. In addition, while blockchain provides a level of transaction immutability, and since only the hash-keys will be captured, the SHA’s will only confirm the hash itself, not the veracity of the underlying data?

Finally, there was Resolve, a two-sided market place for the insolvency services – a platform to buy and sell distressed businesses. Designed to capture turnaround opportunities, the platform has a target market of 14,000 transactions per annum – of which only 1% currently advertised, simply because it’s too expensive to use traditional media (i.e., finance and business publications). In addition, 92% of companies that enter insolvency return zero cents in the dollar to their creditors. Part bulletin board, part deal room, Resolve aims to create a passive deal flow for this alternative asset class. When asked about their commercial model, the founders expect a turnover based on a few hundred businesses each year, and revenue coming from a flat $1,000 per listing – but the key to success will be building scale.

Each of these early-stage startups represent promising ideas, revealing some innovative solutions, so it will be interesting to follow their respective journeys over the coming months.

Next week: Bitcoin – Big In Japan

ASIC updates – Sandbox and Crowdfunding (plus #FinTech Hub)

In recent weeks, ASIC Commissioner, John Price and his team have been making presentations to the FinTech community on two key topics: the ASIC Regulatory Sandbox, and the forthcoming Equity Crowdfunding legislation.

Image by TeeKay, sourced from Wikimedia

blogged about the sandbox when it was announced last year, and at the time, the proposed safe harbour provisions for FinTech startups were seen as being key to fostering innovation within the sector. However, at the time of the presentation I attended (June 13), there was only one confirmed participant in the sandbox scheme. According to the Commissioner, the low take-up was probably due to the timing of the regulations, being so close to summer holidays.

On the other hand, the sandbox has such a limited application, that the Government is proposing to expand its scope to include the provision of products (not just distribution), the provision of credit services, and to extend the current 12-month license waiver period to two years.

The Commissioner also mentioned the consultation process on RegTech combined with a hackathon event to be held later this year, as evidence of the direction the ASIC Innovation Hub is taking. Let’s just hope they can keep up with how fast the FinTech community (especially in blockchain and crypto-currency) is evolving, since regulation usually lags innovation.

At a separate series of FinTech and startup briefings, Mr Price discussed the new equity crowdfunding provisions, due to take effect on September 29. Currently undertaking a consultation process on the detailed regulations, the legislation applies only to ordinary shares issued by companies with a maximum of $25m in assets and annual turnover, and which become public companies once the legislation comes into force.

Eligible crowd-sourced funding companies (CSF’s) can raise a maximum of $5m per annum, and investors can invest a maximum of $10,000 per company each year. CSF’s cannot invest in other businesses or securities, and cannot have simultaneous multiple offers on participating crowdfunding platforms.

The Commissioner spoke about the temporary reporting and corporate governance concessions under the scheme: eligible public companies don’t need to have Annual Public Meetings or audited accounts for a period of 5 years; and the offer documents do not have to be as detailed as a full IPO prospectus. Whether these concessions will be enough to attract issuers, or whether the limitations prove more of a deterrent, it will be interesting to see if the new legislation meets the expectations of government, ASIC, issuers and investors.

Meanwhile, things are getting interesting for anyone following the FinTech hub story, and the perennial Melbourne-Sydney startup rivalry:

First, the Victorian government has issued an RFP for a Melbourne FinTech Hub (submissions close tomorrow…). The state government has also announced its partnership with Fintech Australia and others to host the intersekt festival, following last year’s Collab / Collide event.

Second, Melbourne’s York Butter Factory has recently announced plans to expand into Sydney. While not purely a FinTech hub, this new venture will feature the Commonwealth Bank as an anchor tenant. With former ANZ CEO Mike Smith as its Chair, YBF might also be expected to make a submission to the Victorian RFP.

Third, Sydney’s Stone & Chalk has just announced it will be opening a new FinTech hub in Melbourne. Given that a number of key Melbourne-based financial institutions (such as ANZ, NAB, AustralianSuper, Findex, Genworth and Liberty Financial) are backing this new venture, could it suggest they can’t wait for the Victorian RFP process to finish?

Next week: StartupVic’s Machine Learning / AI pitch night