When Will Australia's Open Banking Revolution Begin?

With Open Banking reforms set for July 2019 we have seen the launch two new Digital Banks in Australia, 86 400 and UP Bank. Cuscal backed 86 400   has serious funding and weight behind it with Anthony Thomson, founder of Atom Bank in the UK, as Chair for the bank.

86 400 is still to receive a full banking license and hopes to launch it's first products early next year. The executive team is in place, in execution mode and there is significant hiring behind the scenes.

UP, backed by Bendigo Bank has quietly entered the market place with  prepaid card offering. The UX is super slick with an account set up in minutes via the app. The card is beautifully designed and the app itself let's you track your spending on the card. It is an encouraging start.

Judo Capital announced the second-largest fundraising round in Australian start-up history and expects their full banking license by the end of 2018.

Xinja meanwhile recently held their first AGM and announced series C capital raise valuing the business at AUS $95m. With regulators yet to grant Xinja a restricted banking license the raise is conditional on securing a license.

We are hearing that Neo Banks are turning capital away, significant amounts. Australian consumers and investors are raring to go.

Volt Bank, the only licensed Neo Bank in Australia is quietly going about their business. There is significant hiring with the business now over 70 people strong. Most hiring is on the development side but as yet, the mobile app has not been released. Volt Bank Deputy CEO Luke Bunbury was speaking at Mumbrella recently talking about distrust of banks. And he is 100% on the money.

 

Everybody wants Neo Banks

Recruiters are having a hard time right now trying to convince top talent to join the big 4 banks. And top talent of the big 4 banks and financial institutions seem eager to move on.

The enquiries are so great in numbers that we are actually having to turn candidates away from large financial institutions. While we would love to help, the career transition from large corporate to startup is difficult with many people failing to make the leap.

And many people in banks offer a very narrow skill set. When you consider CBA has 40,000 staff a Neo Bank will only need 400 staff. So it doesn't look pretty for career bankers, especially the support staff in operations, finance etc.

Despite the high risk involved and the fact that even the licensed Neobanks in Australia are yet to offer a single product, top talent are showing a strong desire to switch.

Peers in the UK are witnessing a similar trend. Contacts at the Global Search firms in London tell me it is a real struggle to fill the top banking jobs. Executives would prefer to join a Fintech where the regulatory sandbox is making life easier, the rewards greater and the opportunity to build and drive change in the industry fulfilling.

 

What is holding Australia back?

Asian Investment in Fintech has increased significantly in the past 12 months and the UK is 5 years ahead of where Australia is now. Despite the efforts of UP, Judo, Xinja, Volt, 86400, Alex and Douugh, Australians have the choice of one product, a prepaid card. In contrast, ANT Financial in China has a 30 day Go To Market turnaround for new products. It raised US $14bn earlier this year.

Who is to blame for the lack of progress?

The Royal Commission appears to be making life for new entrants super tough and the stance of regulators is clearly stunting innovation and progress. While third world countries advance at a rapid rate, it appears the only ship not rising with the tide is Australia.

Australian Prime Minister Hon Scott Morrison MP gave an impressive and encouraging speech at the Annual Fintech Awards dinner in Sydney recently. He made it explicitly clear the Open Banking programme is a priority with the Government relying on the Fintech industry "not to stuff it up".

If successful, Open Banking will be used as the template for all future Australian innovation. Scott Morrison has put a flag in the sand with Australia's Open Banking initiative set to go live 1st July 2019. He seems personally and politically invested in Open Banking, he can't afford for it to be his NBN!

But July 2019 is only 11 months away!

How much time and energy are we seeing wasted at innovation hubs, conferences and meetups? Are we guilty of confusing motion with progress?

(Read this great opinion piece, "ecosystem is not a safe word" by one of my favourite commentators on Fintech, Leda Glyptis)

The regulatory sandbox seems to be filled with quicksand. How many Fintech startups are spending time, energy and precious resources pandering to regulators? Waiting months for a response, only to be asked to fill out more forms, answer more questions, when a 30 minute meeting could quickly resolve any minor queries halting progress.

Quietly, small businesses and start up founders are being driven to despair (and often out of business) while corporate, government and regulators appear more interested in perception than progress.

I am convinced Australia has the talent, ideas, capital and capability to be the leading Fintech innovation hub.

So what are the regulators waiting for? Would more progress be made if the spotlight was put on ASIC and APRA?