Following a deal between regulators, Australian fintech startups will have brighter prospects as a result of facilitated entry into the UK market.
The Australian Securities and Investment Commission (ASIC) and the UK Financial Conduct Authority (FCA) have agreed to speed the entry of fintech business into each other’s markets. While this may appear to be a relatively minor agreement, it could have big implications for the nascent Australian fintech scene.
The agreement involves a commitment to support fintech startups looking to enter the Australia or UK through the services of these respective markets’ Innovation Hubs. Fintech businesses that have already qualified with their home country’s Innovation Hub will be automatically accepted by the corresponding Hub.
Startups will then receive support in understanding the regulatory framework in the market they wish to join and how this applies to their business, similar to the support local fintech startups receive when looking to become authorized to operate. These businesses will be given help during the authorization processes with access to experts and, where appropriate, a specialized authorization procedure.
For Australian fintech startups, this will smooth the process for expanding abroad in a market that Australia has long been linked with. Not only will this help test the business model in a different market, but the UK offers much greater scale – a population of 64 million compared to Australia’s 24 million – and the opportunity to reap the economies of scale that underpin the business cases for many fintech startups.
This could significantly increase the attractiveness of Australian fintech firms when seeking funding, as investors see a mechanism whereby the business can quickly scale up to a profitable level. This suggests that the funding rounds that pass through Australia’s Stone & Calk or Tyro fintech hubs could be much larger than the A$1.3bn of 2015.
By Andrew Haslip, Head of Content for Asia Pacific