The initiatives, announced in the last week, should help stimulate the development of Australia’s fintech ecosystem. First, new federal laws that will create a regulatory sandbox have been broadened to include fintechs that distribute insurance services and will come into effect on September 1, per Insurance News.
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Fintechs and insurtechs will be able to test their products and services for 24 months without a financial services license from the Australian Securities and Investments Commission. Additionally, X15 Ventures, which is a Commonwealth Bank-funded investment vehicle, has announced it will host a virtual pitch event in July, which will provide fintechs with the opportunity to demonstrate their solutions to an array of potential investors and partners, per IBS Intelligence.
The fintech-friendly initiatives will be beneficial to the development of Australia’s fintech ecosystem:
- Allowing fintechs to test their products without a license, in addition to giving insurtechs access to the sandbox, will promote innovation across the space. By removing the red tape of obtaining licensing prior to being able to test products on consumers, fintechs will be able to establish the viability of their ideas and iterate on them in a less costly way, promoting innovation in turn. Additionally, now that insurtechs can test their solutions in the sandbox as well, there will likely be greater innovation across more segments of fintech going forward. Creating favorable conditions for ideation will likely spur a competitive environment, which will also be beneficial for the development of industry-leading solutions.
- Similarly, giving fintechs a platform to showcase their products will help them attract attention from investors. X15’s virtual pitch event, Xccelerate 2020, will provide fintechs with a golden opportunity to shine a light on their businesses, with the aim of garnering investor and partner interest. Events and bodies that connect fintechs with potential partners or investors are crucial, as startups often fail to obtain investment in time to stay in business — so, this may help innovative fintechs bring their products to market.
Although these initiatives will likely stimulate some fintech development, the lack of fintech funding in Australia will remain a barrier to accelerated fintech innovation. Access to capital is a principal barrier to fintech growth, particularly among early stage fintechs, per CPA Australia’s report on the state of fintech. Given that global fintech funding has fallen dramatically and there has been a shift among investors to bet on established fintechs rather than early stage startups, this funding gap isn’t likely to be filled in the near future.
Thus, Australia could take a leaf out of countries like Singapore’s and Hong Kong’s books by rolling out government-led coinvesting schemes to stimulate financing into fintech startups — as ensuring fintechs have access to capital is critical in establishing a culture of innovation, which will help Australia enhance its global standing as a fintech hub.
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