"Treasurer Scott Morrison watches as global fintech policy race heats up" James Eyres, AFR
A global race by governments on fintech innovation policy is on; is Australia at risk of being left behind?
A major policy announcement in London last week by the UK government – attended by Treasurer Scott Morrison – shows just how fast this race is being run.
While financial services has historically been a closed sector, carved up for domestic players who can benefit from regulation, fintech is starting to break that down, as the market goes global.
Building on its "open banking" regime, which was switched on in January, Britain's Chancellor of the Exchequer Philip Hammond said last week he would push the pedal down harder on fintech.
UK Chancellor of the Exchequer Philip Hammond said last week he would push the pedal down harder on fintech. Bloomberg
This includes setting up a new "cryptoassets task force" – comprising Treasury, the Bank of England, and the Financial Conduct Authority – to give blockchain developers a boost. Coders of smart contracts will also be kept busy with a series of "robo-regulation" pilot schemes designed to help incumbents use start-ups and software to comply with regulations.
The UK government will also work with start-ups and existing banks to build "shared platforms" to break down barriers towards collaboration.
UK start-up threat?
Australian customers may ultimately benefit from some of these reforms: a new bilateral trade agreement between the UK and Australia, signed last week, will help UK start-ups move to Australia and compete against Australia's big banks. The "UK-Australia FinTech Bridge" will also help Australia's fintechs get licensed in the UK.
But in the context of a global race for technology talent, an emerging risk for Australia is this bridge - designed to promote two-way traffic - could turn into a drawbridge. Might it be lowered by the UK to lure Australian intellectual property to Britain, before being hoisted up again to the motherland's advantage?
Combined with its more attractive corporate tax rate and the big market for consumers and engineers, London is an top location for fintechs to be domiciled; it's home to 17 of the top 50 international fintech firms.
The shock of Brexit has also encouraged the UK government to get on the front foot with bilateral trade agreements; it has four similar bridge agreements with Singapore, China, South Korea and Hong Kong.
The race is also on to push standards, with the jurisdictions that get this right to have the advantage of interoperability.
Australia is certainly running in this race. An "open banking" regime, which will give customers control of their data, is in the pipeline; Morrison mimicked it following a trip to London at the start of last year. The Treasurer is also been prosecuting the need for competitive tax rates.
But with the UK growing in confidence – Mr Hammond's speech last week paid homage to British giants of the history of computing, such as Tim Berners-Lee, Charles Babbage and Ada Lovelace – and with a UK Trade and Investment a team on the ground in Sydney trying to encourage the most promising local start-ups to move to London, the government will need to continue to ensure its fintech policies are implemented in a way that ensures Australia remains competitive in the increasingly global market for technology talent and companies.