The FTA builds on the UK-Australia Fintech Bridge launched in 2018
The UK-Australia Free Trade Agreement (FTA) was ratified earlier this year. It builds on the UK-Australia Fintech Bridge, launched in 2018, which commits the UK and Australia to strengthen engagement on fintech policy and regulation, facilitates trade flows, provides increased access to capital opportunities and addresses barriers to international growth.
Australia is ranked in the top 10 nations for fintechs, according to Global Fintech Index Rankings 2021. The UK is recognised as a world-leading fintech hub and a source of expertise in Australia. Many UK companies have already achieved success in Australia, including Revolut, Wise, Bud, Currencycloud and Recordsure.
How would you sell Australia to a UK fintech, who is thinking about establishing a base there?
SK: The Free Trade Agreement sets the scene, in terms of mobility, data and everything else. But then diving in to the fintech specifics, Australia is ranked amongst the top ten globally for fintech. And top two in Asia according to the fintech index rankings.
Australia is also similar in terms of legal framework, language, jurisdiction, and structure to the UK, which makes it a compelling market.
We are on the doorstep to Asia, which means we are increasingly close to the world’s economic centre of gravity.
Australia has a developed e-commerce market. We also have a world-renowned retail and tourism ecosystem. This means that payments happen a lot, and the facilitation of those transactions is important.
It’s also worth noting that according to the World Bank, the percentage of people with bank accounts in Australia in 2021 is 99.3%. This is remarkably high compared to the global average. There are enormous opportunities in Australia for fintechs.
AN: To add to the point of being on the doorstop of Asia, we have free trade agreements with many countries in the region. This means that the companies that set up in Australia will be able to leverage those agreements and have easy free access to those Asian markets.
We also recently negotiated an agreement with India, which will allow UK companies who set up in Australia to access that large market in a more streamlined way.
SK: If we look at some examples, Currencycloud is coming to Australia to try and set up partnerships here. Wise recently signed an Australian agreement with a company we are supporting called Papera, to issue their cards and foreign exchange products, for sole traders, small businesses and individuals. Another example is Primer, a payments orchestration platform, which has partnered with Australia-based Monoova, to facilitate payments in the country. These partnerships allow UK companies to get a grip of the market here and expand in the region if they wish.
How will these partnerships benefit fintechs in the UK and Australia?
AN: Any free trade agreement creates a platform for businesses to do more together. It sets out a framework that can eliminate barriers to doing business. And it can streamline and improve flows of trade and investment between two countries.
Specifically for the Australia-UK free trade agreement, there’s three areas worth highlighting that relate to fintech.
One is creating an environment where businesses are treated fairly and equally, where they are trying to do business in each other’s jurisdiction. What that means in practice, is that if there are barriers that exist to an international firm doing business in Australia or the UK, they are eliminated for the companies. And they can also have access to the same government procurement contracts.
It’s also about looking at where can regulation be aligned to the best extent possible. It’s a pathway for both HM and Australian Treasury and regulators, so FCA and ASIC, to work closely together. We are fortunate that we’ve had the Australian-UK Fintech Bridge for a while, but this takes it to the next level where the regulators, to the extent possible, can align on regulation.
Another other area is the data mobility piece. There are no localisation requirements of data, so data can be hosted in each other’s jurisdictions. There are also no restrictions on the flow of data between the countries.
The third part is the movement of people. We often talk about the competition for talent and skills. The free trade agreement has several provisions. One will allow businesses that set up in the other’s jurisdiction to bring their talent with them.
There are also new innovation talent visa pathways into Australia, which makes it easier for workers to come and work in Australia. On 25 September 2023, the Innovation and Early Careers Skills Exchange Pilot program opens for UK citizens early in their career, or who have a demonstrated innovation record, to work and live in Australia.
And the final one is we have increased the working holiday visa age to 35 and removed the restrictive working requirements. Skilled fintech individuals will be able to take advantage of that, as well.
The sharing of information and knowledge, appears to be a key part of this partnership. How will this be done? And what benefits does it hope to yield?
AN: There are huge opportunities around data sharing. Not only to make it easier for companies to operate in each other’s jurisdiction. I’m quite excited to see what new innovative solutions people will come up with to leverage it. I’m hypothesising here, but it could create kind of an open market between Australia and UK, where you no longer look at each market in silo, but you can use the data across both, to better inform consumers across trends and usability of various products. I haven’t seen anything out there yet, but there is an opportunity to look at it through that angle as well.
The new visa pathway to Australia for innovators, what kind of workers will this be open to?
AN: We have a list. Any tech or financial services skills are on that list, certainly for the fintech industry.
What growth has Australia experienced in the fintech sector and how does it hope to grow in the next five to 10 years?
SK: Two well-known examples are Afterpay (Clearpay is the European brand) a company that was at the forefront of founding the concept of BNPL globally. It took the world by storm, acquired millions of customers and was acquired by Square in 2021.
Founded out of a small café in Melbourne, Airwallex, a corporate card issuer and global payment solution provider, is now active in dozens of jurisdictions, too.
The banking and payments sectors are strong here. ESG is becoming increasingly important. There is one company called Brighte, it makes solar, battery and home improvements affordable for Aussies with easy finance and a network of trusted tradies.
AN: A stat that we like to use, that was actually produced by FinTech Australia, is that the fintech industry in Australia has grown from AU$250m in 2015 to more than AU$45b in 2023. I think this huge growth indicates the opportunities and possibilities for further growth.
Also, the tech sector has come up to be the third main industry contributing to the Australian economy. And that is a huge shift for a country that used to be focused on exporting and priding itself on the mining and agricultural industry. That’s an indicator of where Australia is headed. The fintech has been identified by the government as a critical sector that they will continue to invest in.
Are there any up-and-coming fintechs to look out for?
SK: There are two that I would mention. One is called Nano Home Loans, which can approve, verify and issue a home loan within 10 minutes. A massive problem here, and I’m sure elsewhere in the world, is paper based home loan applications. It takes so long to get something that you think should be smoother and quicker. Nano is gaining massive traction in Australia. It has lent more than a billion dollars, partnered with one of the big four banks, pivoted towards software-as-a-solution, and is looking to go global.
Another company we have been working with is called Karta Gift Cards, which has digitised gift carding and is working with Australia’s largest bank, the Commonwealth Bank. The company issues Mastercard gift cards through your phone. It has an amazing, patented technology. It is gaining a lot of traction around Australia and is looking to expand around the world.
AN: It is quite early stage, but some fintechs I am passionate about are those that are coming in to disrupt the energy industry.