Australian fintechs must set sights on Asia: MoneyMe
Consumer fintech, MoneyMe Financial Group, believes the next surge of global fintech growth will be led by Asian markets after a temporary global plateau, as a result of greater market demand and more underbanked citizens, increasing income levels, advanced tech capabilities, and superior tax structures for innovative businesses.
Australian fintechs who don’t include Asia in their growth strategies, both in terms of target markets and location of operations, risk falling behind and missing the next wave of fintech as a result of our far higher corporate tax rates, and the comparatively higher quality of our financial services which drive down the urgency for local innovation.
This comes off the back of recent Census data which revealed that Asians, not Europeans, now make up the largest proportion of the overseas-born Australia population for the first time since colonisation.
“Throughout 2014 and 2015 we saw early-stage, speculative investors place their bets on a plethora of fintechs with questionable substance, or potential for true scalability or value creation, buoyed by positive global equity markets,” said Clayton Howes, CEO of MoneyMe Financial Group.
“With a significant drop in global deal volume in 2016, however, it appears that investors are starting to return focus to traditional business metrics like ROI, ARPU, and gross margins, and the VC market returning to issues of ambition and scale.
“With limited potential for scale in Australia, we believe this will drive Asia’s strong track record of growth even higher, putting Australian fintechs at risk of competition from markets where the cost of innovating is far lower, and the need for innovation far higher.”
Global and regional fintech growth figures demonstrated a reduction in global deal volume from $34.1 billion in 2015, to $11.15 billion in 2016.
However, in Q3’16 Asian VC-backed fintech deals still accounted for exactly half of global fintech funding at $1.2 billion out of $2.4 billion globally, increasing by 50 per cent from Q2’16. Corporate participation in Asian VC-backed fintech deals also reached a 5-quarter high at 50 per cent of all deals recorded in Q3’16.
According to MoneyMe, Australian firms yet to enter Asian markets might consider testing these markets for talent and tech development capabilities first, so as to leverage their superior corporate tax structures while gaining an understanding of how they operate.
“In Australia, our corporate tax rates are inhibitive to the point that it can be far more advantageous for startups to locate operations and development outside of Australia,” continued Clayton Howes.
“In Singapore rates are just 17 per cent and in Hong Kong 16.5 per cent – compared to our hefty 30 per cent which is only set to reduce to 25 per cent over a ten-year period.
“While this is unfortunate for Australian startups who locate operations domestically, the positive side effect may be that it provides a great incentive for these companies to “dip their toes” into Asian markets, and trial working at their more favourable tax rates.
“With Asia looking set to lead the next global surge of fintech growth, Australian fintechs that don’t take a pre-emptive step towards preparing for this inevitability risk being taken over by our nearby overseas rivals,” concluded Clayton Howes.
MoneyMe has recently celebrating breaking through the $125 million originations mark, after record daily compounded growth of 2,747 per cent in its medium amount and personal loans offerings drove its lending volume exponentially in the past few months.
It is now looking to launch a series of niche loan products over the second half of 2017, all designed to provide greater financial inclusion for the growing Australian millennial market.
